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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, October 16, 2017, 11:05 AM (Pacific)

Seattle—

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LTC E-ALERT #17-035: 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 Damon at 206-283-7036 or damon@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 Damon at 206-283-7036 or damon@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:

Chasing millions in Medicaid dollars, hospitals buy up nursing homes
Medicare Advantage 2018 Data Spotlight: First Look
Wringing Cash From Life Insurance
Social Security Giveth, Medical Costs Taketh Away
Medicare Advantage star ratings show insurers' performance hasn't improved
Health, nursing home quality make Colorado 'Best State for Aging'
Start planning now to care for elderly parents
Eldercare litigation: The new fault line
Send Us Your Questions About Paying for Long-Term Care
Meet the New Medicare Card
Americans Face a Rising Risk of Dying Alone
Why Your 50s Are a Good Time to Begin Thinking About Long-Term Care
What if the ‘retirement crisis’ has been exaggerated?

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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, October 13, 2017, 10:05 AM (Pacific)

Seattle—

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LTC BULLET: LTC ARMAGEDDON

LTC Comment: Is long-term care going to hell in a handbasket or is there something we can and should do now to stem the slide?

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a GA whose proprietary tools help advisors find and educate clients, reducing the “Ping-Pong” in the LTCi sales process. Help clients project their exposure to LTC risk, compare Combo vs. Stand-Alone LTCi easily, and make informed final decisions about buying LTCi in 15-20 minutes! Change work-site LTCi sales from a series of proposal deliveries to a single interactive consultation! Claude is the lead author of the Milliman Broker World LTCi Survey, one of Senior Market Advisor's 10 "Power People" in LTCi in 2007, & a past Chair of the Center for Long-Term Care Financing. Contact Claude at 800-999-3026, x2241 or claudet@targetins.com to ask questions or get references. ***

*** WHAT ARE YOU MISSING? Visit the Center’s website at www.centerltc.com. Scroll down to “The Moses LTC Blog,” and check out our two latest “LTC E-Alert” summaries. They list the 42 critical news, data, and report items we posted in September as “LTC Clippings.” Regular Center members receive a weekly report with all those clippings included. Premium members receive all the clippings daily in real time. See what you’re missing. Then contact Damon at 206-283-7036 or damon@centerltc.com to join the Center as a regular or premium member. ***

LTC BULLET: LTC ARMAGEDDON

The litany of what’s ailing long-term care is relentless. Institutional bias prevails, though consumers prefer home care. Medicaid dominates financing, though private payers command better care access and quality. Private LTC insurance struggles, though Medicaid’s deficiencies expand and worsen. The senior living business faces lagging occupancy, though 10,000 boomers retire daily. Aging Americans aren’t saving enough for retirement, though they can’t and shouldn’t count on the social “safety net.” Government is doing nothing to prop up Social Security, Medicare, and Medicaid, though these programs are hopelessly unfunded for the long term.

Without radical change, this whole flimsy house of cards can’t withstand the LTC Armageddon approaching in 2031. What happens then? Even the youngest boomers will be 67 and drawing full social insurance benefits. Their older brothers and sisters start turning 85, succumbing to Alzheimer’s, and needing heavy care for long periods of time. Simultaneously, in the 2030s, Social Security’s and Medicare’s phony “surpluses” evaporate and payouts to beneficiaries and providers plummet. That’ll also be the last straw for Medicaid LTC which depends on recipients’ social security income and generous Medicare reimbursements to survive, despite heavy federal general-fund financial support that will likely also retrench.

It’s obvious what’s coming. So why are responsible public officials doing nothing? What’ll have to change? And what is most likely to happen? The scary answers are worthy of a Friday-the-13^th column with Halloween just around the corner.

Why no action? The Federal Reserve’s decade-long policy of near-zero interest rates, intended to supercharge a lagging economy, has lulled officials into thinking big spending and huge debt are sustainable indefinitely. Yet what that policy has actually caused is lackluster economic growth, stagflation and rapidly growing unfunded pension and social program liabilities. The malaise in long-term care services and financing is just one small aspect of this bigger problem.

What’ll have to change? Stop digging the hole deeper. Let the market set interest rates, balance government budgets, and end the moral hazard of subsidizing irresponsible personal behavior. Send a clear message that public assistance programs, including all forms of social insurance and welfare, are only for the poor. Middle-class and affluent people must fend for themselves until they genuinely qualify as needy. Do you see that happening any time soon? Of course not. So . . .

What’s likely to happen? Nations can defy economic gravity only for so long before the bottom falls out. Examples abound: Germany after WWI, Argentina repeatedly, Puerto Rico and the state of Illinois now, just to name a few. The USA is living on borrowed time and money. Sooner or later, our creditors will stop buying our bonds and expect us to begin repaying what they’ve already loaned us. We’ve managed to avoid the reckoning this long because of international confidence in the dollar as the world’s reserve currency. As Adam Smith said, “there’s a great deal of ruin in a nation.” But once it becomes obvious that America cannot pay back what it owes, ruin will come very quickly. When? Likely right around the LTC Armageddon of the 2030s, if not sooner.

If I’m right, a big test is coming for this country. When the economic reckoning occurs, we’ll find out whether the values that made America great in the first place—individualism, personal responsibility, and honest ambition pursued within freer markets—survived or whether eight decades of pushing people into government dependency wiped them out. The answer will determine whether the United States can rise from the economic ashes and become an economic powerhouse again or will evolve into a violence-prone full-fledged redistributionist welfare state.

In the meantime, what can we and should we do within our narrow sliver of the economy? It’s amazing and hopeful to watch the long-term care insurance business adapt. Unlike government, which is sitting on its hands, many LTCI producers, distributors and carriers are developing new products and strategies to confront the market challenges wrought by poor public policy. It’s a classic example of how the free market adjusts whereas public programs stagnate. My colleagues’ resilience in this field gives me hope that solid values and strong people endure and that we can re-emerge successfully after the economic bottom falls out.

At the Center, we’re planning to make the best of a bad situation too. In next week’s LTC Bullet, I’ll share what your Center for Long-Term Care Reform is planning. The health reform debacle turned our high hopes for Medicaid reform upside down. But there is a very promising direction for us to pivot. Tune in next week for “What’s Next?”

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Updated, Wednesday, October 11, 2017, 10:00 AM (Pacific)

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LTC E-ALERT #17-034: LTC NEWS AND COMMENT

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:

Future residents may be sicker than current ones, study suggests
High Blood Pressure in Early Midlife Associated With Later Dementia Risk
Caregiving for Alzheimer's patients at risk in coming years, report says
LifeSecure Distribution Deal Includes Worksite LTCI
Genworth and China Oceanwide Hint at U.S. Panel National Security Concerns
Why Huge Quality Gaps Among Nursing Homes Are Likely To Grow If Medicaid Is Cut
15 Most Expensive States for Long-Term Care: 2017
Genworth survey: Cost of private SNF rooms jumped 5.5% in 2017
Failing Sense of Smell Tied to Dementia Risk
Majority of Americans believe health insurance or Medicare will pay for long-term care
Popularity of hybrid long-term care policies grows with longer-pay options
Can I get more affordable long-term care insurance?
Buyer Beware: Long-Term Care Costs Are Surging
Long-Term Care Insurance Depends on Genworth-Oceanwide Transaction
LTCA Announces Top Long-Term Care Producers of 2017
People with dementia fail to get specialist care despite great need
A Prime Time to Plan for Long-Term Care Is After Arranging It for Someone Else
Views How to position critical illness in the sales process
The Call-In: Elder Care
Editorial: The feds should let the Genworth deal go forward

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Updated, Monday, October 09, 2017, 1:41 PM (Pacific)

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LTC E-ALERT #17-033: LTC NEWS AND COMMENT

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:

Meet Your Friends Who Get Medicaid
How to Get Medicaid for Nursing Home Care Without Going Broke
Census Bureau: Most seniors still own homes
Experts, lawmakers ponder impact of 8 residents' deaths on SNF sector; facility loses Medicaid funding
Pay Attention to the Small Details When Dealing with Long-Term Care Insurers
$20,000,000,000,000 in Debt and Rising
87% of Americans Favor Health Insurers Being Required to Cover Pre-Existing Conditions
SNF occupancy continues to hit new lows, NIC report shows
How to cope with health care costs in retirement
AHIP: Permanently Renew Medicare Advantage Special Needs Plans
Why Home Care Costs Too Much
James Glickman to Lead Society of Actuaries
Three Ways to Protect your Assets from Nursing Home Costs
The Traditional Long-Term Care Insurance Market Crumbles
Home Equity Conversion Mortgage Program (HECM) Fact Sheet
Ending Alzheimer's by Crowdsourcing Innovations
Report: Nearly 20% of SNF nursing assistants live below poverty line
Reverse Mortgage Pioneer Talks Past, Present, Future of Equity Conversion
Who Will Care for Us?: Long-Term Care and the Long-Term Workforce
Oregon removes nearly 55,000 people from Medicaid after they failed eligibility checks
Warning comes with sharp rise in hospitals holding ownership links to post-acute care
Long Term Care Associates Celebrates Claims Milestone

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Updated, Friday, September 8, 2017, 9:55 AM (Pacific)

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LTC BULLET: OF FLOODS, INSURANCE AND LONG-TERM CARE

LTC Comment: What do flood insurance and LTCI have in common? The answer after the ***news.***

*** WE’RE OUTA HERE: The Center for Long-Term Care Reform doesn’t take many breaks but we’re going to take one this month. Steve is back-packing into the Grand Canyon followed by further national park excursions in the “Silver Bullet of Long-Term Care.” We’ll be back in full force after the first week in October. Premium-member subscribers to LTC Clippings will continue to receive their e-missives, but these may arrive in clumps depending on when we can access the internet to pull down the LTC news. Thank you for supporting the Center for Long-Term Care Reform. We’ll see you again in a month. ***

LTC BULLET: OF FLOODS, INSURANCE AND LONG-TERM CARE

LTC Comment: The awful on-going natural disaster in Houston and southeast Texas is unfortunately not a one-off. The sad fact is we’ve seen this movie before and we’ll probably see it again soon, maybe as early as this weekend with Irma bearing down on Florida. It’s too late for those just devastated, but there is a lesson to be learned from these calamities about how to spread and mitigate catastrophic risk in the future.

There are two kinds of private insurance: the kind people routinely buy and the kind they usually don't. The first category includes life insurance, fire insurance and auto insurance. The latter category includes flood insurance, earthquake insurance, crop insurance and, alas, long-term care insurance. What characteristic distinguishes each of these two kinds of insurance?

If you die, or your house burns down, or you have a car wreck and you are uninsured, it is bad news. You are out of luck and out of pocket! On the other hand, if your property floods or your home quakes or your crop fails or you need long-term care, the government is there to help you with loans, subsidies, grants, and public assistance. In a nutshell, people buy insurance when they face a real financial risk; but when they don't, they don't.

After the great Mississippi River floods of 1993, Center for LTC Reform President Stephen Moses (at that time Director of Research for LTC, Inc.) published an article titled "Of Floods, Insurance and Long-Term Care" (LTC News & Comment, Volume 4, No. 1, Sept. 1993, pps. 11-12.) We repeat that article below as it elucidates the point just made about who buys insurance for what and why.

But first, it’s interesting to note a few things about the conditions it describes as of 1993, 24 years ago.

Back then we thought $20 billion was a big flood loss. Hurricane Harvey will run $190 billion.
Back then the annual cost of a nursing home was about $30,000. It’s more like $82,000 today.
Back then assisted living and home care LTC options were rare. Now they’re most of what private LTC insurance pays for and more than half of Medicaid LTC expenditures go for home and community-based services.
Nevertheless, back then the U.S. spent around $60 billion per year on nursing home care, but that figure still increased to $157 billion by 2015.
Back then OBRA ’93 had not yet passed. Medicaid estate recoveries were not mandatory and LTC eligibility loopholes were even more common and looser than today. We won that battle and another with DRA ’05 which capped the home equity exemption for the first time.
Back then we hoped closing eligibility loopholes and mandating estate recoveries would give Medicaid back to the poor and incentivize the middle class and affluent to plan ahead for long-term care. Naïve? Yes, but we have made progress, though much remains to do.
Back then, the national flood insurance program was under water financially. Today, you need a deep-submergence vehicle (DSV) to find it. For example: “Hurricane Harvey and the National Flood Insurance Fiasco” and “Flood Subsidies Helped Harvey Do More Harm.”

Now a trip down LTC memory lane:

“Of Floods, Insurance and Long-Term Care” (published September 1993)
by
Steve Moses
Director of Research, LTC, Incorporated

This year's [1993] sodden catastrophe in America's heartland is a perfect analogy for the crisis in long-term care financing. The "flood of the century" swamped thousands of homes, dislocated millions of people, and destroyed countless farms and businesses. Costs may reach $20 billion or more. State and federal governments acted immediately to provide emergency aid. Politicians inundated the media with promises that tax-financed indemnification would follow. Although most of the damaged property was located on flood plains, few property owners had private insurance to cover the risk of flooding. Why?

"My home-owners' policy will protect me," some claimed. "The water could never reach me here in a hundred years," many affirmed. "Flood insurance is too expensive," most said. Local officials and bankers frequently bent the rules to approve building permits and bank loans without the technically required flood insurance. No one said "I'm not going to buy insurance, because the government will pay if the worst happens." But, vaguely and evasively, everyone knew it was true. If the floods came, the political compassion combine would replace any natural harvest lost.

Now compare the crisis in long-term care financing. Nine percent of seniors will spend 5 years or more in a nursing home at an average cost exceeding $30,000 per year. People over 85 who are the most vulnerable to long-term institutionalization are the fastest growing population cohort in America. Nursing home costs tripled between 1980 and 1991 (from $20 to $60 billion) and they are projected nearly to triple again between 1990 and 2000 (from $53 to $147 billion). Clearly, long-term care risk dwarfs flood risk. Predictably, the government response has been commensurately large. Two-thirds of all patients in America's nursing homes receive Medicaid. Although Medicaid pays only 48% of nursing home costs directly, Social Security pays another 18% indirectly as the Medicaid patients' contribution to cost of care. Medicare and the Department of Veterans' Affairs picked up another 6% or so in 1991 bringing the government's nursing home contribution to well over 70% of total costs. Finally, Hillary's health care honchos are promising even further expansion of public benefits for long-term care. Although nursing home institutionalization is the single biggest financial risk senior Americans face, only 4% of them have private long-term care insurance and private insurance contributes less than 4% to national nursing home costs. Why?

"My Medicare supplement policy will protect me if I have to go to a nursing home," some claim. "It won't happen to me; I'm too healthy," many affirm. "Long-term care insurance costs too much," most say. Elder law attorneys and many Medicaid eligibility workers bend the rules to qualify prosperous people for the welfare program's nursing home benefit. No one says "I'm not going to buy insurance, because the government will pay if the worst happens." But, subconsciously, everybody knows this is true. The reality is that if nursing home care becomes necessary, someone else usually pays. Who knows or cares whether the payer in fact is Medicare or Medicaid, Uncle Sam or Santa Claus?

The main purpose of private insurance is to replace a small risk of catastrophic loss with the certainty of an affordable premium. In a free market, private insurance also performs another vital function; it prices risk. Voluntary exchanges between willing sellers (insurers) and willing buyers (insureds) determine actuarially sound premium levels. Premiums tell the public as accurately as humanly possible what the precise danger is of living on a flood plain or "going bare" for long-term care. Given this information, rational people who are free to choose can make intelligent decisions in their own best interests.

Ironically, for all its good intentions and altruistic justifications, government distorts this risk calculation and dangerously misleads the public by providing tax-financed grants or subsidies to indemnify the uninsured. By reducing or disguising actual risks, the government discourages responsible people from buying private insurance and rewards the irresponsible for failing to do so. This is the real reason why so few people have flood, crop, earthquake or long-term care insurance, self-serving evasions ("it won't happen to me" or "insurance costs too much") to the contrary notwithstanding. When insurance truly costs too much, it means the risk is too great to take, by definition! If the government rebuilt every home that burned down, no one would buy fire insurance either.

If this assessment of the marketplace is correct, the solution to the long-term care financing crisis is simple: stop giving away free care to people who can afford private insurance. If we do this, everyone who can will buy long-term care insurance, stay off Medicaid, and leave the welfare program to the poor people who need it. The humane way to achieve this goal is to end Medicaid divestiture and require estate recovery of sheltered wealth. That way, we deny care to no one who needs it, but neither do we reward people who fail to insure. Miraculously, this is exactly what the government intends to do if legislation restricting Medicaid planning and mandating estate recoveries, which is now pending in Congress, passes. We are on the verge of a revolutionary breakthrough in long-term care financing!

Curiously, however, the government has not yet figured this out. President Clinton's economic plan estimates savings of $395 million over 4 years by closing Medicaid loopholes and recovering from estates. The Senate Finance Committee puts the figure at $1.1 billion over 5 years. The Congressional Budget Office bumps the estimate to $1.8 billion, increasing in the out years. All three vastly underestimate the potential savings. They take into account only the projected revenues from estate recoveries and the direct cost avoidance from closing loopholes. They completely miss the big impact of the pending legislation--the change it will engender in consumer behavior.

When Medicaid is harder to get and has to be paid back out of the estate in the long run anyway, i.e. when there is no more free ride, people will plan ahead, buy insurance and avoid Medicaid. In Wisconsin, we found that a 10% drop in the Medicaid census of the state's nursing homes (from 65% to 55%) would save $106 million or 20% of the Medicaid nursing home budget. A comparable drop in Medicaid census nationally, all other things being equal, would save $4.1 billion per year! But a 10% drop in Medicaid census is an extremely conservative goal. When the choice is "pay me now" for long-term care insurance, or "pay me later" for estate recoveries, people will search for creative ways to afford private insurance and the access to quality care that it assures.

Research shows that 57% of homeowners can afford long-term care insurance with nothing more than the proceeds of a reverse annuity mortgage, but Medicaid currently exempts the home regardless of value so there is no incentive to tap this resource. Heirs get a windfall from Medicaid now for ignoring long-term care risks, but with their inheritances at stake, they will help their parents to purchase private insurance. When unleashed by the new restrictions on Medicaid nursing home benefits, these two potential financing sources will make long-term care insurance affordable for the vast majority of seniors in America. Then, we will finally see the full impact of private insurance on the long-term care financing problem. [End]

LTC Comment: That was my view in 1993 when Congress was considering and soon passed legislation to close many Medicaid eligibility loopholes and make estate recoveries mandatory. Of course, the future did not play out exactly as I’d hoped over the next 24 years. States didn’t implement the new rules fully. The federal government didn’t enforce them aggressively. The media didn’t report the new personal liability for LTC costs. So consumer behavior changed little.

Consequently, here we are nearly two and a half decades later with Medicaid still the dominant payor for long-term care, with home equity protected from long-term care costs by a welfare program at the expense of the poor, and with the private LTC insurance market shrunken and hurt. We’re just that much closer to a rendezvous with demographic destiny that will devastate the public programs which created this moral hazard and injure especially the people dependent on them.

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Updated, Tuesday, September 5, 2017, 9:55 AM (Pacific)

Seattle—

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LTC E-ALERT #17-032: LTC NEWS AND COMMENT

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:

Retiring This Year? Here’s What You’ll Pay for Health Care
Respite Care: How to Ease the Stress of Caregiving
Researchers Create ‘Alexa-Like’ Assistant to Help Alzheimer’s Patients
Long-Term-Care Insurance Gets a Makeover
Diet Study Suggests It's Carbs, Not Fats, That Are Bad for You
How Well Do We Age in the U.S.? Check Our Scores
Study: Drinking four cups of coffee daily lowers risk of death
Home Health Care: Shouldn’t It Be Work Worth Doing?
How Senior Living Costs Can Devastate Middle-Class Americans
Complete Your Pre-Retirement Checklist
Americans' likelihood of requiring SNF care 'substantially' higher than thought, study finds
Long-term care insurance becomes more expensive, even as the cost of aging skyrockets
This Is How Much Your Kids Are Worth
Is Your Retirement Plan as Well Thought Out as Your Vacation?
5 Reasons Genworth's Would-Be Buyer Could Still Close the Deal

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Updated, Friday, September 1, 2017, 11:01 AM (Pacific)

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LTC Bullet: Long-Term Care News and Analysis

LTC Comment: Center for Long-Term Care Reform Premium members have the option to receive our LTC Clipping Service and weekly LTC E-Alerts newsletters. Today, we’d like to share a sample of these members-only services with a wider audience. Our topic is the news this week, so we’ll skip our usual ***news*** section and dive straight in.

LTC Bullet: Long-Term Care News and Analysis

Many Center for Long-Term Care Reform Premium members are familiar with our LTC Clipping Service, and from what we hear, get great value from this benefit of Premium membership.

For those who don’t already know, our LTC Clipping Service is an excellent way to stay on top of current and critical long-term care news without having to spend hours a day researching on the internet. We send our Clipping Service subscribers an average of 2-3 emails per workday with a must-read-article link, a pull quote and some brief analysis. We’re sensitive to the fact that we all receive too many emails, so we’re very careful to send along only the most important LTC news items.

As an added benefit and for convenient reference, we keep a running archive of the clippings we send in our new LTC Clippings Archive, dating back to January 2016. This archive is organized by LTC-related subject and sub-category. While CLTCR Premium members will continue to receive their LTC Clippings in real time, they and Individual members, have access to the Clippings Archive through our Members-Only Zone website. Here’s a breakdown of the Archive’s subject categories:

INSURANCE (Long-Term Care Insurance, Critical Illness Insurance, Hybrid and Miscellaneous [including alternative financing solutions])
LONG-TERM CARE (General, Cost, Assisted Living, Nursing Homes, Home Care, Caregiving, Veterans Affairs and Government Solutions)
MEDICAID (General and Medicaid Planning and Crowd-Out Effect)
MEDICARE (and Medi-Gap and Medicare Advantage)
SOCIAL SECURITY
ALZHEIMER'S DISEASE
POLITICS, LEGISLATION AND PUBLIC POLICY
ECONOMICS, DEMOGRAPHICS AND DATA
RETIREMENT PLANNING
HEALTH AND HEALTHCARE
OTHER

If you’re reading this, chances are you play a valuable role in protecting people from the risk and cost of long-term care and to that end we think the Clipping Service allows our subscribers to be more effective doing so. Based on their feedback, we think our subscribers feel the same. For example:

I find your clipping service invaluable. It helps me stay current not only with industry news (carrier’s, legislation and such) but consumer news as well. Every agent should be reading these stories daily… their clients and prospective clients are. To offer the best service one must be informed. Thank you for all your hard work in providing this service and thank you for being such a strong and dedicated advocate for our industry. -- Phillip W. Sullivan, President – SellingLTC.com

Your clipping service has saved me hundreds of hours of research each year since we started receiving your clippings. Using it makes me feel confident knowing that I’m on top of anything happening in the industry – from legislation to state movements to industry and insurer announcements. And being on top of things is critical in our industry. Any serious LTCi agent who doesn’t take advantage of this . . . doesn’t realize the value the service can bring to their production! For anyone above the level of agent, this service has to be considered a must. Thank you for your diligence in uncovering all the daily news a person in our industry needs! -- Mark Randall, LTCI Trainer

Please find below a sample collection of clippings we’ve sent to our Clipping Service subscribers over the past two weeks. Read through them and if you think that receiving news items like these in real time would be valuable to you, please consider subscribing at the Premium membership level. By doing so, you can stay on the forefront of professional knowledge and help us fight for rational long-term care policy reform.

Contact Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month.

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8/31/2017, “Long-Term-Care Insurance Gets a Makeover,” by Ellen Stark, Consumer Reports

Quote: “Once you or a family member starts having trouble with everyday activities, such as preparing meals and showering alone, you might need some assistance. It could be help from a home health aide or a move into an assisted living facility or a nursing home. Planning for this can be a fraught exercise. But there are new types of long-term-care insurance that might help.”

LTC Comment: A positive Consumer Reports article on LTCI? Check to see if the moon is blue tonight. Stephen D. Forman of Center- corporate-member Long Term Care Associates is quoted in the piece.

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8/29/2017, “Home Health Care: Shouldn’t It Be Work Worth Doing?,” by Eduardo Porter, New York Times

Quote: “How to provide long-term care for a fast-aging population poses one of the more convoluted challenges of the American labor market. Care providers — home health aides, personal care attendants and certified nursing assistants, in the government’s classification — are expected to be among the nation’s fastest-growing occupations. The Department of Labor’s economists expect about a million more will be added from 2014 to 2024. And yet despite their critical importance to the well-being of tens of millions of aging Americans, one-fourth of these aides live in poverty. The jobs are so unappealing that it is hard to keep workers in them: four in 10 leave the occupation entirely within a year. Many prefer the fast-food business.”

LTC Comment: Articles like this exasperate me. We have a problem with home health caregiving because Medicaid made nursing home care free which crowded out private markets for home health and private insurance to pay for it. So how do we fix it? Spend more Medicaid money to save more Medicare money. Yeah, that’ll happen.

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8/28/2017, “How Senior Living Costs Can Devastate Middle-Class Americans,” by Mary Kate Nelson, Senior Housing News

Quote: “Boosting affordability is top of mind for many senior housing providers, as it’s becoming increasingly obvious that many baby boomers will struggle to pay for senior living—even those who are comfortably in the middle class. That’s already the stark reality for 60-year-old Kuna, Idaho, resident Betsy Winkler, according to a report in the Miami Herald. Winkler’s husband, 69-year-old David Winkler, has Alzheimer’s disease. He lives and receives care at Ashley Manor Memory Care community in Boise, Idaho, for which the couple currently pays $48,000 per year.”

LTC Comment: The bigger story is that this is the exception, not the rule. Long-term private pay in a nursing home is almost non-existent having collapsed from 50% a few decades ago. Who pays? Medicaid. No wonder so few people worry about LTC risk and cost enough to save, invest or insure.

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08/27/2017, “Complete Your Pre-Retirement Checklist,” by Wendy Connick, The Motley Fool

Quote: “Before you finally and officially retire, it's important to make sure you're ready for such a huge shift in your lifestyle and your finances. Much like a pilot will complete the tasks on a pre-flight checklist before the plane ever leaves the ground, you should read through and complete the tasks on your retirement checklist before deciding to leave the workforce forever.

“Look into long-term care insurance (10-15 years before retirement)
If you're going to buy long-term care insurance, the best time to do so is in your 50s, not your 60s. Your premiums will be much lower if you buy the policy this early. Plus, by getting that decision out of the way so far in advance, you'll simplify the often chaotic pre-retirement years by resolving one of your critical decisions. Because the majority of retirees will need long-term care at some point, and the costs can easily run into the six-figure range, long-term care insurance is likely a good financial move. At least look at a few policies and consider how they'd fit into your retirement budget. If you decide to pass on long-term care insurance, you'll definitely need to come up with some other way to pay for long-term care.”

LTC Comment: LTCI is at the top of this pre-retirement checklist.

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08/28/2017, “Long-term care insurance becomes more expensive, even as the cost of aging skyrockets,” by Mary Katherine Wildeman, Post and Courier

Quote: “Barbara Franklin has slowly watched over the years as companies offering long-term care insurance have dropped out and premiums have become difficult to afford. As a long-term care specialist and the owner of Franklin & Associates, she said she guides her clients through the decisions they're faced with as they approach retirement. Often the choices are impossible. While long-term insurance costs rise, so, too, do the debilitating costs of long-term care. An annual cost estimate from Fidelity Investments found last week that a 65-year-old couple will need $275,000 to pay for health care during their retirement, a 6 percent increase over last year. Franklin said having her own responsibilities to care for her 92-year-old mother have reminded her to focus on the importance of making sure her clients can pay for the long-term care they will likely need one day.”

LTC Comment: This article features CLTCR friend and member, Barbara Franklin, and ultimately focuses on the value of LTCI policies in spite of rate increases.

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08/28/2017, “This Is How Much Your Kids Are Worth,” by Suzanne Woolley, Bloomberg

Quote: “Michael Hurd doesn’t have a long-term-care insurance policy, but he does have something likely to prove valuable in his old age, however—two daughters. Few Americans assign a dollar amount to the worth of their children—they are without price. But as lead author of a new study looking at nursing home cost and use, Hurd can quantify the value that daughters, and children in general, bring to parents facing one of life’s most dreaded prospects: a stay in a nursing home.”

LTC Comment: If it’s beneficial to consider how much a person’s children are worth in terms of LTC services they might provide, it should also be beneficial to consider how much it’s worth to spare those children the known health consequences of providing that care. Unfortunately, this article does not do so and undermines the importance of real long-term care planning.

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08/28/2017, “Is Your Retirement Plan as Well Thought Out as Your Vacation?,” by Mark Pruitt, Kiplinger

Quote: “After working hard all of our lives, the goal for most of us is to have the freedom to go explore and complete the ‘bucket list’ that we have always dreamed of. The problem is most people plan their vacations better than they plan their retirements.

“6. Devise a long-term care plan.

Six members of my wife’s family have had Alzheimer’s disease. My mother-in-law had it for 16 years. My sister-in-law has it currently and started her journey with Alzheimer’s at age 55. I have seen it on a very personal level. I have long-term care strategies for my wife and me in multiple forms. My parents have multiple forms of long-term care as well. Know your options. Traditional long-term care costs a premium. Can you afford it? The length of traditional long-term care policies is typically three to five years. What if you keep on living, as my mother-in-law did? The long-term care for my family started in the home and graduated to a nursing home. Layered options could include the use of non-traditional means like annuities with enhanced benefits riders that could be used for in-home, assisted living or nursing home care. Some life insurance policies have additional living benefits to help pay for care. Lack of planning for long-term care could devastate families. At the very least, explore all of your options.”

LTC Comment: A timely take on retirement planning in this vacation season.

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8/23/2017, “Opinion: Why nursing homes are suffering from old age problems,” by Betsy Rust, MarketWatch

Quote: “Remember nursing homes? Someday, perhaps as soon as the next decade, that’s how Americans may start to think about them — in the past tense, as institutional relics. The grim economic reality is that many nursing homes are facing extinction. In fact, I predict that the confluence of a number of trends — demographics, competition from nursing home alternatives, federal and state health-care policy and even technology — will mean as many as 20% of nursing home beds will be eliminated in the next five years.”

LTC Comment: So true, but why and what should be done about it? That’s why I sent this note to the author:

Dear Ms. Rust,

Based on your MarketWatch op-ed, I think you are very thoughtful and concerned regarding long-term care. I’ve spent 35 years working in and thinking about the challenge of long-term care services and financing. So I share your concern.

You’re right that nursing homes are hurting, unresponsive to the demographic onslaught, and challenged by less institutional options. But do you know how we came to have a nursing-home-based, welfare-financed long-term care system in the first place? More importantly, what has to change to improve long-term care?

I’d like to share my latest paper with you: How to Fix Long-Term Care Financing (2017). Honestly, I think it will open your eyes to some fascinating insights and even, possibly, to some business ideas.

Sincerely,

Steve Moses

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8/18/2017, “LTC deals led healthcare transactions for July,” by Emily Mongan, McKnight's LTC News

Quote: “Long-term care facilities dominated healthcare transactions compared to other sectors in terms of deal volume in July, according to a new update. . . . The trend is showing no signs of slowing down, Gary Herschman, an attorney with the firm Epstein Becker & Green, told Bloomberg. ‘As the baby boomers move into their 60s and 70s, investment continues in the long-term care sector, which expects a corresponding growth in demand for services in the near future,’ Herschman said.”

LTC Comment: Too bad ways to pay for long-term care are not expanding at a pace to keep up with places to receive care.

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4/9/2017, “Why Parents Need to Be Willing to Cut Off Adult Children Financially,” by Maddy Dychtwald, Wall Street Journal

Quote: “Among those Americans who give their adult children post-college financial support, the average amount given is $6,800 annually, according to the study, a four-year, 50,000-respondent investigation into the changing lifescape of retirement conducted by my firm, Age Wave, in partnership with Merrill Lynch. And parents are gifting that money just as they are facing their own retirement head on. . . . Supplementing our young adult children might seem like a huge help to them now. But in the long run, perhaps the greatest financial gift we can give them is to be able to afford our own retirement and the possible need for care in retirements that can last 30 years or more. The last thing many of us want is to have to turn to our children for financial help in their 40s or 50s–when they will be focused on paying mortgages, saving for their children’s college fund and funding their own retirements.”

LTC Comment: That $6,800 would buy a very good LTCI policy.

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8/21/2017, “VA seeks to funnel more nursing home money to rural areas,” by Matt Volz, Associated Press

Quote: “Veterans Affairs Secretary David Shulkin said Monday during a visit to Montana that his agency will propose changes to make it easier for rural areas to receive funding to build nursing homes for veterans. . . . The VA now sets its priority list by looking at veteran demographics and the need for beds, making it difficult for some rural areas to compete, VA officials said. The agency plans to propose regulation changes by year's end to ensure some of the money goes specifically to rural areas. Whatever proposal emerges must go through a public comment period, so it's unclear when any changes may take effect.”

LTC Comment: We’ll add this story to our members-only-website feature Reasons Why Veterans Should Not Depend on VA Benefits for Long-Term Care with the note “especially in rural America.”

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8/20/2017, “The Language of Long-Term Care: Navigating the care maze can be overwhelming; understanding the lingo can help,” by Christine Benz, Morningstar

Quote: “As I reflect on my parents' final years, a period that included multiple hospital stays, trips to rehab, and the hiring of in-home caregivers, I realize that my siblings and I were often a step behind with our responses. We initially hired in-home caregivers to help for 10 to 20 hours a week when, in hindsight, we should have had them there every day. We made the difficult decision to move my dad to a long-term care facility with memory care only after he had taken a few serious falls at home that caused him a lot of physical discomfort. And so on.”

LTC Comment: This author and her family could have had crucial care management help if they’d had LTCI. So much of what she says in the article about LTCI and Medicaid is wrong. We’ll reach out to her, explain some things and send her How to Fix Long-Term Care Financing (2017).

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8/17/2017, “The role of advisors in longevity planning,” by Kimberly Foss, Financial Planning

Quote: “Similarly, boomers don’t really want stocks, bonds, mutual funds or insurance; they want the means to live their desired lifestyle when they are no longer actively employed. They want to solve the problems that come with longevity, and those problems, more and more, go beyond simply funding their retirement accounts. . . . In order to position themselves to adequately respond to the longevity needs of an aging clientele, advisors will increasingly be called upon to provide not just transaction-based assistance, but also to serve as facilitators of the relationships required to address these and other problems. We will fall short helping our aging clients if we stay in our financial silos; instead, we will need to become conduits for leading them to the solutions they require.”

LTC Comment: Hopefully financial advisors will direct clients to LTCI producers rather than Medicaid planners when it comes to long-term care planning, but that has not always been the case.

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8/15/2017, “Could This Idea Help Fix America's Shortage Of Home Care Workers?,” by Chris Farrell, Forbes

Quote: “The demographics of a growing demand for elder care in America is raising alarms. The number of adults 65 and over requiring long-term care could rise by more than 70% over the next quarter century, estimates MIT Sloan School of Management professor Paul Osterman, author of the new book, Who Will Care for Us?: Long-Term Care and the Long-Term Workforce. But the supply of home care workers is likely to fall short of demand. Perhaps a novel program from the AARP Foundation and Capital Impact Partners, a Community Development Financial Institution based in Arlington, Va., will help solve this problem.”

LTC Comment: A far better idea than home care co-ops is to stop trapping so many people on Medicaid which pays for most home care with rates less than the cost of providing the care. With private payers paying market rates, home care jobs would pay better and attract enough qualified caregivers.

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8/15/2017, “ACA Diluted Funds for the Severely Disabled,” by Paul T. Spencer, Wall Street Journal letter to the editor

Quote: “The ACA has expanded funding for Medicaid services, but it has also to an even greater degree expanded the pool of people eligible to dip their spoon in the pot. It used to be that Medicaid did a fair job of providing for the truly disabled and needy. Now it does a lousy job of serving more people, many of whom are not truly needy and could provide care for themselves. . . . Please join me in supporting the repeal of the ACA and put Medicaid funding back in the pot for the truly needy and disabled in our society.”

LTC Comment: This letter captures the essence of what ObamaCare did to Medicaid. For the wider significance, see our new report How to Fix Long-Term Care Financing (2017). Thanks to Green Bay, Wisconsin Center Regional Rep Romeo Raabe for tipping us to this item.

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Updated, Monday, August 28, 2017, 10:53 AM (Pacific)

Seattle—

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LTC E-ALERT #17-031: LTC NEWS AND COMMENT

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:

Opinion: Why nursing homes are suffering from old age problems
LTC deals led healthcare transactions for July
Why Parents Need to Be Willing to Cut Off Adult Children Financially
New York Life Promotes New Life Policy's LTC Benefits
LTCG Agrees to Acquire LifePlans
Newman Long-Term Care Buys SIA Marketing's National Sales Operations, Processes and Software
LTCG to Acquire Munich Re's Long-Term Care Insurance Arm
Caregiving Needs Double as End of Life Nears
How Long Will $1 Million Stretch In Retirement?
VA seeks to funnel more nursing home money to rural areas
The Longevity Revolution and Its Emerging Economy
‘Beyond amyloid’: A look at what’s next in Alzheimer’s research
Where prospects carry the most student loan debt

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Updated, Friday, August 25, 2017, 9:57 AM (Pacific)

Seattle—

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LTC Bullet: Government LTC Financing “Revolution” Averted

LTC Comment: Obama CMS efforts to pay for LTC value instead of volume were stopped in their tracks recently. Details after the ***news.***

*** LTCG AND LIFEPLANS REUNITED: LTCG, Inc., the leader in business processing outsourcing for long term care insurance, announced Tuesday that it is acquiring LifePlans, Inc., a national provider of innovative risk management solutions for insurers. Press release here. LTCG CEO Peter Goldstein opined that the two companies, both industry leaders and competitors, are even stronger together and showcase LTCG’s commitment to the long-term care industry. LifePlans began in the 1980s when Stan Wallach, Jay Greenberg and others left Brandeis University to form the company in those heady days for LTC insurance. Greenberg left LifePlans to form LTCG in 1990. Now, 27 years later, the two companies are one again. We wish Goldstein and his team every success in the new venture. Let’s touch base with them around the turn of the year to see how the merger is going. ***

*** MORE LTCI INDUSTRY NEWS: Gene and Pamela Schmidt, founding owners of SIA Marketing, Inc., announced the sale of their national sales operations, processes and software to Newman Long-Term care. We congratulate Pamela and Gene, long-time friends and supporters of the Center for Long-Term Care Reform, on the sale of their business and their transition to a new phase of serving the people of North Dakota. Congratulations also to Deb Newman and Thrivent who will now carry on the Schmidt’s mission to protect North Dakotans and all aging Americans from the risk and cost of long-term care. We wish all involved every success and happiness. ***

LTC BULLET: GOVERNMENT LTC FINANCING “REVOLUTION” AVERTED

LTC Comment: In LTC Bullet: A New Revolution in Long-Term Care Financing . . . by Government, published November 6, 2015, we warned that “radical, disruptive changes in how government pays for long-term care are advancing rapidly.” We explained thus:

Huge changes in how the government pays for post-acute and long-term care are under way, building steam, and about to revolutionize LTC service delivery. “Bundling” and “prospective payment” are on every health care bureaucrat’s lips. The system’s transformation to “managed care,” whereby state Medicaid programs turn over responsibility for providing and paying for LTC to the highest bidders, has long been sweeping the country. We’ve touched on that development and its likely ramifications in earlier Center publications. There will be more to come.

The government’s latest move toward centralized control of the LTC 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). The new system will put care managers and providers at far greater financial risk. Only time will tell if this shake-up improves or damages the care patients actually receive.

Time has told.

According to Healthcare Finance: “The Centers for Medicare and Medicaid Services on Tuesday officially announced it is pulling back from mandatory bundled payment models set up under the Obama administration.”

Why is this development so important? For the answer to that question, we refer you to the following speech Steve Moses delivered at an Omega Healthcare Investors, Inc. conference on November 10, 2015.

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“The Future of Long-Term Care Seen Through the Prism of History”
by
Stephen A. Moses

If value-based payment is good enough for Medicare, it should be good enough for McDonald’s too.

A monopsonistic, government-based nutrient payer could ensure quality food distribution by paying for value instead of quantity.

We could reimburse prospectively for dietary-related groups of alimentary consumption episodes rewarding lower food poisoning levels with five-star ratings.

“What if I want a Big Mac,” you ask? Tough luck. Too many calories for too little nutrition. The re-hospitalization risk is off the chart.

Why do we have prospective payment systems, bundling, managed care, and value-based payment in health care but not in food distribution?

Why is government micro-management of long-term care service delivery and financing the wave of the future?

Well, it’s been a slippery slope for 50 years. Santayana said: Remember history or you’ll repeat it. We’re not just repeating the mistakes of the past, we’re doubling down.

So, how did we get into this mess?

Once upon a time, long-term care was a Mom and Pop arrangement. Mom and Pop took care of Grandpa and Grandma, usually as a family, sometimes as a business.

Then, in 1965, government stepped in to help. At first, Medicare and Medicaid paid generously on a fee-for-service basis--initially to win passage of those programs and later to sustain support for them from business and political interests.

Medicare was to be “social insurance” for acute health care with premiums paid and benefits received by all.

Medicaid was to be a safety-net for long-term care, a means-tested public welfare program.

Remember that distinction between social insurance and welfare. We’ll return to it.

In the beginning, Medicaid offered only nursing home care. This was the origin of the welfare-program’s infamous “institutional bias.”

And in the beginning, Medicaid had no asset transfer restrictions nor any estate recovery requirement. Access to publicly funded nursing home care was easy and practically universal.

Now, people aren’t stupid. They saw that Medicaid would pay for Grandma in a nursing home, but they’d be burdened by personal caregiving or face cash out of pocket for any other kind of care.

Why pay for home care, adult day care, respite care or assisted living, when the government provides nursing home care?

Unsurprisingly, a private market for home and community-based services did not develop in those early years. There was no financial incentive for entrepreneurs to build a better long-term care mouse trap.

The same generous nursing home policies also stunted a budding private long-term care insurance market in the mid-1970s. Why insure privately for a risk and cost the government already pays for?

The nursing home profession was pretty savvy also. They saw a huge new funding source in Medicaid and Medicare. Naturally, nursing homes adapted to take full advantage of the opportunity. They formed powerful interest groups to influence public LTC policy.

So what do you think happened by the early 1970s? P.J. O'Rourke, the political satirist, likes to say "If you think health care is expensive now, just wait until it's free." Of course, the cost of Medicaid financed long-term care exploded.

Did the government respond by addressing the cause of this cost inflation—easily available free long-term care paid for by Medicaid?

No. Government attacked the symptom of bulging budgets instead.

Figuring nursing homes couldn’t charge for beds that don’t exist, the public pontiffs of health policy imposed “certificate of need” requirements severely limiting new construction.

But you don’t need a Ph.D. in economics to understand what happens in any market when you artificially cap supply. Prices tend to increase and that’s exactly what happened.

Nursing homes said: “We can’t build more beds? Fine, we’ll charge you more for the ones we already have. Thanks, by the way, for protecting us from new entrants into our business.”

So, government finally got the message and curtailed the cause of the problem, free Medicaid-financed nursing home care, right? Wrong. The Medicaid monarchs capped nursing home reimbursement instead.

This was the origin of the differential between low Medicaid reimbursements (often less than the cost of providing the care) and market-based rates half again higher but dwindling in total as private-payers followed public policy incentives and migrated to Medicaid.

Now, put your economists’ hats back on. With supply and price capped, what do you think happened to demand? Correct, it went through the roof! Nursing home occupancy in the mid-1980s jumped to 95 percent at a time when hospitals were little more than half full.

If a nursing home was willing to accept Medicaid's low reimbursement rates, it could fill all of its beds . . . no matter what kind of care it provided. Consequently, quality of care collapsed in principally Medicaid-financed nursing homes. Or so the public powers-that-be concluded.

True to form, government attacked the symptom (poor quality) instead of the cause (public financing). As if wishing could make it so, Congress simply mandated higher quality, more nurses’ aides, better training and so on in the Omnibus Budget Reconciliation Act of 1987.

Thankfully, this time federal command and control worked. Expenditure growth abated and quality improved—NOT.

Now caught between the rock of inadequate reimbursement and the hard place of mandatory quality, the nursing home profession had no place to turn but to the courts.

Suing under the 1981 “Boren Amendment” which required state Medicaid programs to reimburse nursing homes adequately so they could provide good care--lo and behold--state nursing home associations won most of those lawsuits.

Who says you can’t fight city hall?

But then, what do you think the government did next? You guessed it. Congress repealed the Boren Amendment in the Balanced Budget Act of 1997. Since then, there has been no legal floor under Medicaid reimbursement for nursing home care, yet costs continued to grow insupportably.

Now, while all this was going on another situation developed. Private payers in nursing homes, paying half again as much as Medicaid for the same semi-private room, began to wise up.

They rebelled against this “cost shifting” toward them by seeking ways to qualify for Medicaid themselves. After all, state and federal laws require the same quality of care regardless of payment source. So why not?

Some Medicaid eligibility workers were only too eager to help families who faced a long-term care crisis by stretching Medicaid’s already elastic financial eligibility rules in their favor.

Other workers tried to solve the national debt by strictly enforcing the most draconian rules keeping even the poorest families off Medicaid.

A special practice of elder law evolved to impoverish wealthier clients artificially in order to qualify them for LTC benefits.

In other words, Medicaid long-term care eligibility became a crap shoot with the lucrative benefit passing to people lucky enough to get a lenient eligibility worker or wealthy enough to consult a Medicaid planning attorney.

Not that it was ever very hard to qualify for Medicaid long-term care benefits. Despite the common misconception that you must be “low income” to get Medicaid, the fact is that anyone with income below the cost of a nursing home, upwards of $80,000 per year on average, is eligible based on income.

Consequently, two out of five people receiving Medicaid LTC benefits have incomes between $51,000 and $217,000 per year or more. More than two-thirds getting Medicaid LTC have incomes between $30,000 and infinity. Only for the low income? Hardly.

What about assets? The usual limit of $2,000 in cash or equivalents is unquestionably poor. But to get to that level, you can spend down on anything, not just care. Lawyers advise world cruises, big parties, better cars and larger houses to dispose or shelter excess assets.

Furthermore, virtually unlimited exempt resources don’t even count toward the asset limit. These include . . .

At least $552,000 in home equity and--with no dollar limit at all--one business including the capital and cash flow, Individual Retirement Accounts, one automobile, term life insurance, prepaid burial plans, home furnishings, and personal belongings.

If you still have too much money, your friendly local Medicaid planner will wave a magic legal wand and reduce the surplus to a level below the welfare program’s income and asset limits.

Cost in attorneys’ fees to become eligible for Medicaid after you already need care? About the same as one month in a nursing home private pay, maybe $6,000 or $7,000.

In the early ‘80s, Congress began to attack the problem of Medicaid eligibility abuse with a long series of statutes:

TEFRA (the Tax Equity and Fiscal Responsibility Act of 1982) for the first time authorized state Medicaid programs to impose asset transfer penalties, liens on real property and estate recoveries. But these measures were only voluntary.

MeCCA (the Medicare Catastrophic Coverage Act of 1988) required state Medicaid programs to penalize asset transfers made for the purpose of qualifying for public benefits within 30 months of application.

OBRA ’93 (the Omnibus Budget Reconciliation Act of that year) made estate recoveries mandatory, expanded the asset transfer look-back period to 36 months, and eliminated the previous 30-month cap on the asset transfer penalty.

When none of these measures worked as hoped, Congress and President Clinton stepped in with HIPAA (the Health Insurance Portability and Accountability Act of 1996) which made it a crime to transfer assets for less than fair market value for the purpose of qualifying for Medicaid.

Senior advocates and the elder law bar called this the “Throw Granny in Jail Law,” so Congress repealed that provision in the Balanced Budget Act of 1997 and replaced it with the “Throw Granny’s Lawyer in Jail Law” making it a crime to advise a client in exchange for a fee to transfer assets to get Medicaid.

When that law was deemed unconstitutional because it held lawyers culpable for recommending a practice made legal again when Congress repealed “Throw Granny in Jail,” public policy intended to save Medicaid for the needy was dead in the water again.

Nothing more happened until the Deficit Reduction Act of 2005 put the first cap ever on Medicaid’s home equity exemption. It started at $500,000 or $750,000 at state legislatures’ discretion and has increased with inflation to range today from $552,000 to $828,000, from four to seven times the average senior’s home equity.

The DRA ’05 also extended the transfer of assets look-back to five years and closed several loopholes such as the “half-a-loaf” strategy, but it left other gimmicks used to qualify millionaires for Medicaid in effect such as the “Medicaid-compliant annuity.”

Now, let’s pause for a moment and review. Government intervened in the long-term care marketplace 50 years ago by providing nursing home care to infirm seniors with most of their assets exempt from spend down and most of their income (largely Social Security benefits) as co-insurance.

This caused Medicaid LTC expenditures to skyrocket leading to federal and state initiatives to control costs by capping supply and price which drove up demand, undercut quality, reduced private-pay census, and crowded out private markets for long-term care insurance or home equity conversion (to fund LTC) and for home and community-based services (to provide care).

Meanwhile, from the early 1980s forward, another theme developed which was aimed at addressing the problem of escalating Medicaid LTC costs without confronting their real cause.

Academics and government officials became enamored of the idea that Medicaid's long-term care financing crisis could be relieved by paying less for expensive nursing home care and more for lower-priced home and community-based services.

The idea is that taking care of people in their own homes or in the community must be cheaper than maintaining them in a nursing home. Data often cited at the individual level seem to show that home care is less expensive than nursing home care.

But this reasoning commits the fallacy of composition, inferring that potential savings for specific individuals are additive to the society as a whole.

In fact, available research does not show that home and community-based services save money compared to nursing home care overall.

Community-based care usually only delays institutional services. Between them, expanded home care plus eventual nursing home care end up costing more in the long run than nursing home care alone.

That fact is borne out by historical data showing continued growth in total Medicaid long-term care expenditures. While nursing home costs have leveled out considerably, the home care side of Medicaid continues to grow rapidly.

Here’s the point: providing long-term care in the most appropriate and desirable setting is a worthy goal to pursue. But it does not save money.

For every person in a nursing home or assisted living facility in America, there are two or three of equal or greater disability, half of whom are bedbound, incontinent or both, who remain at home. They are able to stay home because their families, mostly daughters and daughters-in-law, struggle heroically to keep them out of an institution.

When government starts providing long-term care that they want (home care) instead of long-term care that they’d prefer to avoid (nursing home care), people come out of the woodwork to take advantage of it. That too drives up overall Medicaid LTC expenditures.

Finally, Medicaid financed home and community-based care is deadly to the marketability of private long-term care financing alternatives, such as reverse mortgages or long-term care insurance.

The big benefit of being able to pay privately for long-term care is the ability to command red-carpet access to top-quality long-term care at the most appropriate level and in the private marketplace.

To the extent the government conveys to the American public that consumers can obtain the same benefits financed by Medicaid, Medicaid will continue to explode in costs and reverse mortgages to fund long-term care in the short-term and LTC insurance to fund it in the long run will remain stunted.

What a mess! Here it is in a nutshell.

Easy access to Medicaid-financed nursing home care prevented the development of a private market for home and community-based services.

Explosive cost growth led to ultimately unsuccessful government efforts to control the supply, price, quality, type and access to Medicaid funded care.

Notoriously low Medicaid reimbursement rates for two-thirds of nursing home residents were partially counterbalanced by relatively generous Medicare reimbursement levels for post-acute and home health care.

As good business people, the nursing home profession pursued the incentives in public policy by reaching out for higher paying Medicare post-acute patients and by seeking fewer lower-paying long-term Medicaid custodial care residents.

That caused the balance of Medicare financing to shift significantly from nearly all acute care toward much more post-acute and long-term care.

Between 1990 and 2013, long-term care—defined as nursing home and home health care—remained roughly eight percent of total National Health Expenditures.

During the same period, however, the proportion of long-term care expenditures funded by Medicare more than tripled from 9 percent in 1990 to 29 percent in 2013. Long-term care increased from 4.5 percent of total Medicare expenditures to 11.7 percent in those 23 years. (CMS-NHE Data)

Consider what this means. Our current long-term care financing system depends, and has depended for decades, on generous and growing Medicare reimbursements for home care and nursing home care balancing meager Medicaid reimbursements for the majority of people dependent on either or both programs.

As worries about Medicare’s solvency grew throughout the 2000s, federal policy makers looked for new ways to control public LTC expenditures. CMS hit upon the idea of driving reimbursement toward “quality” instead of “quantity” as a way to reduce long-term care cost growth in Medicare and Medicaid.

In other words, this latest push by government to manage the LTC service delivery and financing system is designed to fix or at least mitigate problems that were actually caused by earlier government market interventions.

As always before, these new interventions address symptoms—high costs, low quality and public-policy-induced market dysfunction—instead of the real causes, perverse incentives created by earlier government intercessions.

The risk is that further interference in an already fragile LTC market will turn everything topsy-turvy just as the age wave begins to crest and the entitlement programs’ unfunded liabilities begin to come due.

Remember what I said at the beginning of this talk about how Medicare began as “social insurance” and Medicaid as welfare?

Ironically, political pressure is building now to means-test, that is to say welfarize, Medicare. I’ve already shown how Medicaid has become a de facto entitlement, the dominant LTC funding source for all economic levels of Americans.

The net effect of this long historical process is that public financing of long-term care has expanded beyond government’s ability to pay while private LTC financing has dwindled almost to disappearance.

The public does not know who pays for long-term care, but they know someone must pay. You don’t see Alzheimer’s patients dying in the gutter.

The result is a public asleep about the risk and cost of long-term care and dependent by default on a mostly publicly financed LTC service delivery system that may be on its last legs, unable to squeeze more and better care out of more and more intrusive regulations and mandates.

In a free market consumers rule. They demand quality and volume. If they don’t like what they get, they vote with their pocket books and move on to products and providers they prefer.

Competition to provide the best care at the lowest price in the most appropriate settings could and would solve the LTC service delivery and financing problems that have been created by government’s interventions, however well-intentioned those interventions may have been.

Do you have any doubt that long-term care services and financing in the United States would be better if government had left the market alone and allowed competition and the profit motive to make the best possible care available at affordable levels?

Would the poor suffer? More than they do now? Hardly. There would be room for a real safety net paying market rates for the full continuum of care. Such a safety net might even be possible without public funds, relying entirely on charity and philanthropy.

But, that is not the course we’re on. Let’s get back to reality. I fear we’re headed toward a perfect economic storm when interest rates finally increase making service of our massive public debt unsustainable and leading to a severe retrenchment in Medicaid and Medicare long-term care financing.

Such an outcome is very nearly inevitable. The Federal Reserve and the U.S. Government cannot ignore economic gravity forever. Sooner or later debt and unfunded promises come due.

But to end on a more positive note, if the worst does happen, we’ll be forced to get back to methods and strategies that are more in keeping with the traditional American values of independence, personal responsibility, self-sufficiency and hard work.

I predict that as government is compelled to withdraw from LTC financing dominance:

Medicaid will have to become a real welfare program. Its home equity exemption will disappear or be radically reduced. Consumers will use their home equity to pay privately for long-term care. They’ll employ reverse mortgages for that purpose.

That new source of private financial oxygen will reinvigorate all providers across the whole continuum of long-term care.

Over time, after watching their own inheritances consumed by their parents’ long-term care costs, the next generation will finally see the merit of private LTC insurance and begin to buy it.

Medicare will stop being “social insurance” paid for by and available to all. It will be means-tested and become a program for the poor, and hence, as the saying goes, “a poor program,” like Medicaid.

Acute health care will drift away from mostly public funding toward mostly private financing through health savings accounts and high-deductible insurance.

After 50 years of consuming our economic seed corn by moving ever more fully away from private and toward public financing of long-term care, demographic and economic reality will force us back to the kind of freer market that made the country great in the first place.

Now, before I conclude and turn to your questions, let me anticipate your first query. You might ask:

“Well Steve, you’ve painted a pretty dismal picture. Why are you so worried that this whole publicly financed long-term care house of cards may soon come crashing down?”

I’m glad you asked.

My organization, the Center for Long-Term Care Reform, has developed a tool to measure and analyze that risk.

We call it the “Index of Long-Term Care Vulnerability.” We’ve applied the Index to the LTC service delivery and financing systems in four states so far: Virginia, New Jersey, Georgia, and most recently, New Hampshire.

You can find our reports on each of those projects by opening the link on my handout which will take you to an online version of the handout where all the links in it are live.

Our Index of LTC Vulnerability analyzes the sustainability of current long-term care systems by examining published data in each of seven key issue areas. These are:

Aging demographics: how many 85 year olds are in the pipeline? Answer: Too many; more than triple what we’re dealing with now by 2050.
Morbidity: how sick will they be? Answer: Too sick. Recent optimistic compression of morbidity predictions are not bearing out due to the obesity epidemic.
Medicaid: how viable is the welfare program as a source of future LTC financing? Answer: Not very based on expenditure trends, ObamaCare expansion, easy income and asset eligibility, inadequate reimbursement and cost shifting, dual eligibles, rebalancing and managed care challenges.
Federal revenue: can revenue from taxation and borrowing sustain the federal share of Medicaid? Answer: Almost impossible when interest rates increase because of elevated debt and entitlement liabilities and high state matching rates exacerbated by provider taxes and recessions.
State revenue: can state economies generate enough revenue to fund their share of Medicaid? Answer: Very doubtful based on rankings of states’ fiscal policies by Cato, Forbes, Mercatus, the Pew Charitable Trust, and the Urban Institute.
Private financing alternatives: could genuine asset spend down, higher estate recoveries, reverse mortgages and private LTC insurance relieve the financial pressure on Medicaid and, if so, how much? Answer: Plenty if Medicaid financial eligibility rules were tightened and enforced.

Finally,

Entitlement mentality: to what extent has easy access to all forms of public assistance undercut the willingness and ability of the American people to fend for themselves? Answer: A lot based on metrics like dependency on Medicaid, food stamps, welfare, and disability, but we won’t know how much until we see what happens when people do have to fend for themselves.

The Index of Long-Term Care Vulnerability comes with an interactive score sheet which allows the user to apply weights and scores for each factor of analysis in order to estimate, albeit subjectively, the potential vulnerability of the national and each state’s long-term care service delivery and financing system.

Check it out and let me know what you think.

Well, that’s my take on where we are, how we got here, and what’s likely to happen next. Thanks for your attention. I’ll be glad to answer questions.

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Updated, Tuesday, August 22, 2017, 10:30 AM (Pacific)

Seattle—

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LTC E-ALERT #17-030: LTC NEWS AND COMMENT

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:

“‘Granny pods’ become a solution for retirees with limited budgets
The Language of Long-Term Care: Navigating the care maze can be overwhelming; understanding the lingo can help
The role of advisors in longevity planning
7 Peeks Into Long-Term Care Insurance Issuers' Thinking
You can get quality elder care but be prepared to pay for it
Life Expectancy for a 65-Year-Old Increases 1.6 years
A centered approach to research on aging
Could This Idea Help Fix America's Shortage Of Home Care Workers?
ACA Diluted Funds for the Severely Disabled
Brain scan study adds to evidence that lower brain serotonin levels are linked to dementia
3 Insurance-Based Medicaid Planning Strategies
Nearly 1 In 5 Hospice Patients Discharged While Still Alive
Hospital patients don’t get good data on nursing homes

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Updated, Friday, August 18, 2017, 9:48 AM (Pacific)

Seattle—

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LTC BULLET: ON THE ETHICS OF MEDICAID PLANNING

LTC Comment: Is Medicaid planning ethical? Reasonable people can disagree. But is that the right question to ask? If not, we need to dig deeper.

LTC BULLET: ON THE ETHICS OF MEDICAID PLANNING

LTC Comment: As I perused the New York Times yesterday morning, I noticed an article titled “The Ethics of Adjusting Your Assets to Qualify for Medicaid.” Thinking it might be a follow up to Ron Lieber’s thoughtful column on the subject from last month, I clicked through. But no, it was the same column he published on July 21, which garnered a swarm of replies, thoughtful and otherwise. I passed over the piece originally with nothing more than an LTC Clipping. But re-reading it now, I think it deserves a fuller reply. What follows are quotes from Mr. Lieber’s NYT column followed by our comments.

Lieber/NYT: “At any given moment, there is a large group of citizens who want nothing more than to make absolutely certain that they are impoverished enough to qualify for Medicaid sooner rather than later. Someday, you might be one of them.”

LTC Comment: Sad, but true.

Lieber/NYT: “Welcome to the (perfectly legal) world of Medicaid planning, the plain-vanilla term for the mini-industry of lawyers and others who help people arrange their financial lives so they don’t spend every last dime on a nursing home. Once properly impoverished under the law, then Medicaid, which gets funding both from your state and the federal government, picks up the tab.”

LTC Comment: Right, but there is an important nuance. Most people qualify quite easily for Medicaid long-term care benefits without spending down assets for care and without any special, lawyer-assisted planning. Only fairly prosperous people need to resort to Medicaid planning. That’s why Medicaid ends up paying for all or part of 80 percent of nursing home bills even though it pays for only a little more than 60 percent of nursing home costs. The key point here is that if an affluent person qualifies for Medicaid, his or her private income will pay most or sometimes all of the bill, but the nursing home receives only the Medicaid rate of reimbursement, on average less than the cost of providing the care. That reality drags down care quality for all, the genuinely needy and the artificially self-impoverished alike.

Lieber/NYT: “In my first Medicaid column on June 30, I asked for your questions about the program, aging and long-term care, and you sent me more notes about the ethics of Medicaid planning than on nearly any other topic. About half of you were outraged by the ethical implications, and the rest wanted to know where you could sign up for it.”

LTC Comment: Nationally syndicated financial columnist Jane Bryant Quinn wrote many columns excoriating Medicaid planners for artificially impoverishing their clients. She told me once that she hesitated to write any more such columns, because no matter how strongly she criticized the practice “my phone would ring off the hook with people wanting to find a Medicaid planner.”

Lieber/NYT: “The debate is not new, though it happens to be the rare topic on which the editorial boards of The New York Times (“Pretending to Be Poor”) [1996] and The Wall Street Journal (“Medicaid for Millionaires”) [2005, quoting Steve Moses] have agreed over the decades.”

LTC Comment: Noteworthy is the timing of both those editorials. The New York Times editorialized against Medicaid planning in 1996, the year Congress passed and President Clinton signed the Health Insurance Portability and Accountability Act (HIPAA ’96) which criminalized Medicaid planning, but became known as the “Throw Granny in Jail Law,” and was quickly repealed and replaced by the “Throw Granny’s Lawyer in Jail Law” (Balanced Budget Act, BBA ‘97), which targeted Medicaid planners, but was later deemed unenforceable.

The Wall Street Journal column was published in 2005 as I was spending half time in Washington, DC educating anyone who would listen about the need to curtail Medicaid planning and give the welfare program back to the poor. We won that fight when the Deficit Reduction Act (DRA ’05) was signed into law capping Medicaid’s home equity exemption for the first time and making the transfer of assets rules longer and stronger.

Lieber/NYT: “Did I mention the need for a qualified lawyer? If you want to do some homework first, the book “How to Protect Your Family’s Assets From Devastating Nursing Home Costs” will give you a sense of what questions you need to ask. However, you may want nothing to do with this. It would not surprise K. Gabriel Heiser, the lawyer who wrote the book. He’s heard from colleagues over the years who wanted no part of this work. This confused him, he said in an interview this week, given that many of them handled estate planning for wealthier clients. There, they helped people avoid paying millions to the government, whereas Mr. Heiser’s work merely helps clients get the government to pay a few hundred thousand for care on their behalf.”

LTC Comment: Comparing tax planning with Medicaid planning is commonplace and wrong. There is no moral equivalency. Legitimate tax planning results in full payment of all taxes legally due, but no more. Medicaid planning results in someone who could have paid privately for top quality long-term care in the most appropriate venue ending up in a nursing home dependent upon a welfare program notorious for paying providers too little to ensure quality care.

Lieber/NYT: “The retorts are numerous. I heard several versions of the following in recent weeks: I’m a taxpayer and paid into this system. I was thrifty, and my neighbors were not. They went on vacation. In fact, I watched them go when I was home at Christmas, and they came back with suntans. And now my heirs should get nothing? To accuse me of gaming the system is absurd; I just don’t want to be taken by it.”

LTC Comment: I’ve heard that argument many times over the years, as often as not from hypocritical fiscal conservatives who want to have their ideological cake and eat it too. Their reasoning is specious and no justification for Medicaid planning. Think of it instead as an indictment of public policy that rewards failure to save, invest or insure for long-term care and punishes responsible planning.

Lieber/NYT: “Here, Medicare pays the surgery and drug bills for people with heart disease and cancer. But dementia patients . . . need expensive supervision, which Medicare generally doesn’t pay for. That’s not fair, one might argue, so doing everything legally possible to get a dementia patient eligible for Medicaid is like a form of political protest that corrects an inequity.”

LTC Comment: The problem with this argument is that Medicare is fraught with trillions of dollars in unfunded liabilities. We’ll likely lose Medicare for acute care before we gain more government funding for long-term care. Undermining Medicaid by overloading it with people who could have, would have and should have paid their own way helps no one, least of all the truly needy who genuinely need Medicaid.

Lieber/NYT: “Then there are the parents who take the estate they bestow on their children as a point of pride. One adult child, who did not want to be named because her father is so emotional on the topic, said that he insisted on a [Medicaid planning] trust even though she and her sibling did not ask for any money. . . . All he has done is sweat and scrimp and save so he could leave something behind. Any discussion about not doing so causes him to cry and have panic attacks. So should his daughter really have tried harder to talk him out of a trust?”

LTC Comment: Well, on the other hand, I personally struggled to afford the premiums for private long-term care insurance on both of my parents, myself and my late wife. Should I have to pay for this man also so his children can get an inheritance they evidently neither need nor want? Medicaid is supposed to be a safety net for people in need, not a guarantor of uninsured legacies.

Lieber/NYT: “Jennifer L. VanderVeen, a lawyer in South Bend, Ind., who delivered a presentation at a 2009 legal conference on the ethics of gifts as part of Medicaid planning, said that many of her clients come in with more practical concerns. For instance, they would prefer not to have to sell a small business or a farm that employs other family members in order to pay for long-term care.”

LTC Comment: Medicaid exempts one business or farm including its capital and cash flow with no dollar limit, so that argument is erroneous. But why should Medicaid, a means-tested public assistance program intended as a long-term care safety net for the poor, be used as free inheritance insurance for heirs of a business owner? Turn the argument around. If people really risked losing a business or farm to the cost of long-term care, maybe they would plan earlier and more responsibly to prepare for that risk and cost privately.

Lieber/NYT: “If you’re looking for another way to frame these issues, consider one other thing: . . . Would the care be worse if you or your relatives were on Medicaid, and because of that, limited to whatever nursing home or home-care agency was available? If so, is the most ethical choice to urge aging parents or relatives to keep as much money as possible to pay out of pocket for the care of their choice?”

LTC Comment: Medicaid pays long-term care providers on average less than the cost of providing the care. So obviously, access to and quality of care are lower for people dependent on Medicaid than for people who have prepared to pay their own way. The one exception to this rule applies to affluent people who qualify for Medicaid after paying privately for a while to secure their place in one of the nicer nursing facilities that take only a small number of Medicaid residents. (Nursing homes roll out the red carpet for private patients who pay half again as much as Medicaid.) After a few months, their Medicaid planners flip the switch and convert them to public assistance. Thereafter state and federal laws prevent their being removed simply because their source of payment changed. Poor people do not have “key money” to buy their way into the best nursing homes, so they’re stuck with the mostly-Medicaid facilities that have such a poor reputation for quality. If you really care about the ethics of Medicaid planning, this situation which benefits the affluent at the expense of the poor, should figure prominently.

Lieber/NYT: “I’ve been struggling to answer this question for weeks now, and if you have any experience with it yourself, I’d like to hear from you. Watch this space in the coming weeks and months for more on how money and Medicaid are so often a part of the mix when we shop for care for ourselves or our older loved ones.”

LTC Comment: OK, you’ve heard from us and we’ll be watching for your next column on the subject. In the meantime, thanks for taking a serious, thoughtful look at this critical, but controversial topic.

Closing LTC Comment: Do you see a common thread in the excuses people use to justify Medicaid planning morally? What were they?

Medicaid planning is no different than tax planning.
I worked hard and saved. Why should lazy bums get all the government gravy?
Lucky heart attack victims have Medicare, so dementia patients should have the same.
It’s not fair my kids won’t get my business or estate.

It’s human nature to want something for nothing. America’s founders understood that changing human nature with moral suasion is fruitless. So they employed checks and balances to prevent one branch of government from dominating the others.

Whether Medicaid planning is ethical or not is the wrong question to ask. Medicaid has lost its original checks and balances that prevented privileged rent seekers from taking advantage of the welfare program. In other words, the problem is poor public policy not human nature or immorality.

The good news in this conclusion is that the problem is easily fixable. Remove the perverse incentives in Medicaid that discourage responsible long-term care planning. In their absence, human nature, i.e. self-interest, will prevail for the good, incentivizing all to save, invest or insure against the risk and cost of long-term care.

How? Well, that’s why we published How to Fix Long-Term Care Financing (2017). Read it for a full analysis of the problem and the solutions.

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Updated, Monday, August 14, 2017, 9:48 AM (Pacific)

Seattle—

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LTC E-ALERT #17-029: LTC NEWS AND COMMENT

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:

Vince Bodnar, Larry Nisenson to Join Genworth’s U.S. Life Insurance Division
Long-Term Care Insurer Pain May Hit More Companies
New report details way to finance LTSS
Firm Proposes Long-Term Care Insurance Run-Off Program
Study Links Moderate Drinking to Reduced Risk of Dementia
LTCG awarded five-year contract from the California Public Employees’ Retirement System (CalPERS)
Study suggests higher Medicaid payments for assisted living operators
Middle-Income Boomers Face ‘New Retirement’
Why a Pennsylvania insurer's collapse could whack Californians in the wallet
Medicare Advantage Spends Less on Care, So Why Is It Costing So Much?

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Updated, Friday, August 11, 2017, 10:57 AM (Pacific)

Seattle—

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LTC BULLET: 2017 LTC INSURANCE SURVEYS PUBLISHED

LTC Comment: Broker World magazine has published its annual long-term care insurance surveys for 2015. Highlights after the ***news.***

*** WHY SUBSCRIBE TO LTC CLIPPINGS: To counsel prospects and clients responsibly, financial advisors--including insurance agents--need to know more than basic demographic facts and product knowledge. Good LTC planning requires understanding the six “blind men” of long-term care and how they interact: government, consumers, senior advocates, providers, insurers and financiers. For the story behind that observation, read “The Elephant, The Blind Men and LTC” here.

How can you keep abreast of those complicated topics and their interactions? You can spend dozens of hours every week canvassing the internet for potentially relevant articles, speeches and reports. Then scan volumes of useless information to find and absorb the few valuable gems of knowledge they contain. Or you can subscribe to LTC Clippings and let us do that part of the job for you.

If you subscribe to LTC Clippings and invest a few minutes of your time each week to read and consider them, we promise you a plentiful and profitable source of actionable information and insights. Contact Damon at 206-283-7036 or damon@centerltc.com for details and to subscribe. ***

LTC BULLET: 2017 LTC INSURANCE SURVEYS PUBLISHED

LTC Comment: Every year Broker World magazine publishes surveys of traditional and worksite long-term care insurance. The surveys’ authors are well known LTCI experts, Claude Thau, Allen Schmitz, and Chris Giese. We’ve culled a few highlights from this year’s surveys below. Check out all the details in the July and August issues of the magazine. Be sure to subscribe to Broker World if you haven’t already.

It’s clear from the following data that the private long-term care insurance industry continues to face daunting challenges. On the other hand, it is equally true that private LTCI is playing a bigger role in financing extended care as its policies mature and claims increase. What the future holds is anyone’s guess, but a likely scenario is that publicly financed long-term care will face harder times, and the obstacles holding back LTCI will retrench over time.

Excerpts from “2017 Milliman LTCI Survey,” Broker World, July, 2017

“The 17 carriers reported sales of 88,922 policies ($220,501,539 of new annualized premium) in 2016, which we believe represents 100 percent of the stand-alone LTCI industry’s 2016 individual and multi-life sales.”
“Overall, the number of policies sold was 13.6 percent less than in 2015 and the annualized premium was 14.2 percent less than in 2015.”
“‘Combo’ policies (i.e., LTCI combined with life insurance or annuity coverage) and policies that offer LTC-related accelerated death benefits more than made up for the sales reductions.”
“Six insurers increased sales compared to 2015.”
“The average issue age dipped from 55.9 to 55.8, the lowest ever reported in this survey. Fewer insurers offer coverage to people under issue age 40 or above issue age 75.”
“The average premium per new insured dropped slightly from $2,497 to $2,480 (reflecting 17 insurers), and the average premium per new buying unit (recognizing couples as one buying unit) dropped slightly from $3,526 to $3,496.”
“Reported affinity business amounted to 6.1 percent of the 2016 new insureds (down from 6.8 percent in 2015 and 7.8 percent in 2013 and 2014) but only 5.1 percent of the premium (consistently a lower percentage of premium than policy count).”
“Northwestern and Mutual of Omaha continued as the number one and number two carriers, combining for 45 percent of the new sales in terms of premium.”
“In 2015, the number of in-force policies for our participants dropped for the first time (0.2 percent). In 2016, the number of in-force policies dropped again, by 0.3 percent.”
“Nonetheless, year-end in-force premium increased 2.9 percent in 2016 (2.4 percent in 2015). In-force premium is increased by sales, price increases, and benefit increases, and is reduced by lapses, reductions in coverage, deaths, and shifts to paid-up status for various reasons.”
“Participants’ individual claims rose 6.9 percent and group claims rose 4.7 percent. Overall, the stand-alone LTCI industry incurred $9.7 billion in claims in 2015 based on companies’ statutory annual filings, raising total incurred claims from 1991 through 2015 to $107.8 billion.”
“The average time from receipt of the application until a policy is issued dropped from 44 days to 38 days, the fastest time since 2012.”
“Insurers continue to deal with disheartening price increases on existing policies and unsatisfactory results for those older blocks. Recently priced policies are based on assumptions that rely on far more credible data, hence premiums should generally be more stable, but many financial advisors presume that currently issued policies will face steep increases.”
“We are aware of only 37 times claimants have resorted to independent third-party review (IR), and the insurers’ denials were upheld 89 percent of the time. . . . The existence and voluntary expansion of IR and the insurer success rate when appeals occur all work to justify confidence in the industry’s claim decisions. Such confidence may be reflected in the media, as the industry has received little criticism regarding claims adjudication in the past few years.”
“The annual number of life insurance policies sold with long term care benefits is now more than twice the number of stand-alone policies sold.”
“Only one participant believes there will eventually be a government LTCI program and expects that program to provide limited benefits. Seven insurers responded that they do not expect such a program, and the other participants chose not to answer this question.”
“The shift to gender-distinct pricing is nearly complete, but the impact continues to evolve. At the beginning of 2013, all products used unisex pricing. Now only one insurer uses unisex pricing outside the worksite. (Note: two carriers use unisex pricing for couples.)”

Excerpts from “2017 Analysis of Worksite LTC Insurance,” Broker World, August, 2017

“In 2016, participants reported sales of 14,929 worksite [WS] policies for $23.7 million of new annualized premium, increases of 22.1 percent in the number of WS policies and 12.4 percent in new annualized WS premium.”
“These increases contrast with the declines in total 2016 LTCI sales compared with 2015 (13.6 percent fewer policies and 14.2 percent less new annualized premium).”
“Worksite LTCI sales accounted for 18.5 percent of the policies sold in the industry (up from 12.5 percent in 2015) and 11.9 percent of the annualized premium (up from 8.7 percent).”
“For one carrier, 64 percent of its new premium came from WS sales. Another carrier had 37 percent of its sales from WS. The other three carriers sold seven percent to 11 percent of their new premium in WS.”
“The average worksite premium dropped from $1,740 in 2015 to $1,590 in 2016. Among participants, the average varied from $1,344 to $3,453, so a change in distribution by carrier can significantly affect the overall average premium. Core business drags the average worksite premium down a lot and carve-out business pulls it up, so a change in distribution by core versus carve-out can also have a big impact on average premium.”
“The WS share of the total market has been increasing for the past three years despite pressures affecting the worksite market. Most of the increase in WS market share reflects the decline in NWS stand-alone LTCI. The popularity of combo products has eaten into the NWS stand-alone LTCI market much more so than in the worksite market.”
“Our data indicates that the WS market has become increasingly dominated by female sales, perhaps because females are becoming informed about the attractiveness of unisex premiums and because the WS market charges males a lot more than males are charged in the NWS market.”
“Insurers have also raised their minimum ages to avoid anti-selection (few people buy below age 40) and, to reduce exposure to very long claims, stopped insuring people who don’t go to the doctor regularly.”
“Uncertainty related to the Patient Protection and Affordable Care Act (ACA) continues. The waves of confusion and work for employee benefit brokers and employee benefit managers continue to make it hard for brokers and clients to consider WS LTCI.”
“Voluntary worksite LTCI sales may gravitate toward combo products, which have the added advantage of providing valuable life insurance coverage that is viewed as a more immediate potential need.”

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Updated, Monday, August 7, 2017, 10:15 AM (Pacific)

Seattle—

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LTC E-ALERT #17-028: LTC NEWS AND COMMENT

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:

LTC worker shortage a 'train wreck waiting to happen,' expert says
Insurers Think They’ve Found the Perfect Patients for Profits
Reverse Mortgage: Yes or No?
10 Tips for Children of Aging Parents
Post Crisis: Rebounding But Not Recovered
Struggling Americans Once Sought Greener Pastures—Now They’re Stuck
Older Americans Aren’t as Poor as We Thought
Medicaid Managed Care Comes to Assisted Living: Challenges abound as providers adapt to growth of health plans in the Medicaid program
Even Without Congress, Trump Can Still Cut Medicaid Enrollment
Getting Less Than 7 Hours Of Sleep May Lead To Obesity, Study Finds
Is Long-Term Care Insurance Still Viable? Key Considerations for Retirees and Advisors

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Updated, Friday, August 4, 2017, 9:33 AM (Pacific)

Seattle—

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LTC BULLET: MOVE THE MEDIA

LTC Comment: Let’s talk about getting “How to Fix Long-Term Care Financing” in front of the media and thought leaders, after the ***news.***

*** LTC CLIPPINGS. The following story caught our eye last week, so we forwarded it to LTC Clippings subscribers. Medicaid managed care is moving into assisted living and raising the same problems it caused for nursing homes. I warned about the slippery slope for assisted living facilities as they take on more Medicaid residents in a 2004 article titled "The Sirens' Call, The Primrose Path, and Assisted Living." Let us search for and send you the articles, reports and data you need to see. Subscribe to LTC Clippings. Contact Damon at 206-283-7036 or damon@centerltc.com

8/2017, “Medicaid Managed Care Comes to Assisted Living: Challenges abound as providers adapt to growth of health plans in the Medicaid program,” by Patrick Connole, Provider

Quote: “States contracting with health plans to operate as Medicaid managed care organizations (MCOs) is a growing phenomenon. So is the correspondingly sharp rise in MCOs administering services for elders and people with disabilities, under the formal name of managed long-term services and supports (MLTSS). As a result, populations in skilled nursing care centers, and increasingly Medicaid beneficiaries in assisted living communities, are coming under the umbrella of a new world order for reimbursement, where health plans are the payer and the state acts as overseer. It is in the assisted living space that this article will examine how managed care is having an impact on provider contracting, reimbursement, and care coordination.”

LTC Comment: It’s hard to see how putting another government-induced layer between patient and provider will improve long-term care, much less reduce costs. ***

LTC BULLET: MOVE THE MEDIA

LTC Comment: “How to Fix Long-Term Care Financing” is our new flagship, leading the advance for long-term care financing reform.

If you haven’t read the Center for Long-Term Care Reform’s new report, published last week jointly with the Foundation for Government Accountability, please do so now.

The health reform fiasco playing out in Washington, DC has left policy analysts and free market advocates depressed and demoralized. While the health policy forces regroup, LTC policy should advance.

Toward that end, your Center for Long-Term Care Reform hereby deputizes all members and friends in the cause. Help us get “How to Fix Long-Term Care Financing” into the hands (and minds) of people who can (1) spread the word (reporters and policy analysts), (2) implement better policies (government officials and trade association representatives), and (3) change the laws (state and federal legislators and their staffs.)

How do you do that? Well, it’s mainly about taking opportunities as they arise. For example, if you read an article with which you either agree or disagree (nearly everything you read, right?), reply to the author. Find something nice to say about his or her writing, take courteous issue with anything on which you differ, and send along “How to Fix Long-Term Care Financing” as another way of looking at the subject.

That’s exactly what Lori Fjelstad of Center-corporate-member GoldenCare USA did to get the favorable attention of an influential reporter. Lori wrote:

Your article was well written and informative, but I had to cringe at the last recommendation that said before you buy LTC insurance you should consult with an eldercare attorney, which may lead to Medicaid planning which is neither good for the client nor taxpayers. I encourage you to read a recent report written by Steve Moses “How to Fix Long-Term Care Financing.

Judith Graham of Kaiser Health News, whose piece was published in the New York Times, replied “I'll read it with great interest, Lori, and get back to you. Judy.” That’s how to get the word out and forge good media relationships.

But don’t expect every outreach attempt to be successful. As in sales, it’s not how many times you fail that counts, but how many times you succeed and how many times you succeed is directly proportional to how many times you try and fail. Throw enough spaghetti at the wall and some of it is going to stick.

If you attend a professional conference, or serve on a trade association committee, or meet with a political representative, mention the report, get a business card, and send a link to the report when you get back to the office.

At the Center, we’re systematically sending the report to everyone we think should read and heed it. With your help, we’ll reach a much wider audience. Thanks as always for your support and proactivity.

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Updated, Monday, July 31, 2017, 9:14 AM (Pacific)

Seattle—

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LTC E-ALERT #17-031: LTC NEWS AND COMMENT

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:

Older Americans Buck Trend of Decreased Homeownership
Alzheimer’s Stats Look Alarming, But No Need to Panic
High-Cost Dual Eligibles’ Service Use Demonstrates The Need For Supportive And Palliative Models Of Care
How To Get Long-Term Care At Home Without Busting The Bank
The Hidden Costs In Medicare Advantage Plans
Disabled Medicare enrollees are not getting the same care as able-bodied ones
New Study Identifies Major Gaps in Medicaid Structure
Over 80 Percent of Women Fail Retirement Income Literacy Quiz
40% underestimate assisted living costs
Kitces: When and how to deduct long-term care insurance
Wisconsin faces critical shortage of care workers for disabled and elderly
The Ethics of Adjusting Your Assets to Qualify for Medicaid
My uncle with dementia needs long-term care — should I refinance his house?

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Updated, Wednesday, July 26, 2017, 9:54 AM (Pacific)

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LTC BULLET: “HOW TO FIX LTC FINANCING” REPORT RELEASED

LTC Comment: FGA and CLTCR released Steve Moses’s study “How to Fix Long-Term Care Financing” today. The press release, a link to the report, and how you can help make its recommendations a reality follow.

LTC BULLET: “HOW TO FIX LTC FINANCING” REPORT RELEASED

LTC Comment: The purpose of today’s LTC Bullet is to get our new report, released today, into your hands. Please download “How to Fix Long-Term Care Financing,” save it as a .pdf, and send it to everyone you can think of who could benefit from its analysis and recommendations.

Like whom? Well, local and national reporters who cover health and long-term care issues; your local, state and federal political representatives; colleagues in whatever aspect of the business you pursue such as LTCI producers, LTC providers, Medicaid administrators, etc. If you have a personal relationship with anyone in a policy making capacity, please send him or her our report with your recommendation to review it.

Feel free to refer anyone to whom you send the report to the author, Stephen Moses, at 425-891-3640 or smoses@centerltc.com.

Now here’s the press release sent to the media by the Foundation for Government Accountability this morning.

New Study Identifies Major Gaps in Medicaid Structure, Whitney Munro, July 26th, 2017

Naples, FL – A new study has identified a major loophole in the structure of Medicaid that has led to massive cost overruns and a shortage in available funds for truly needy individuals. According to the study, eligibility expansions and loopholes have led to a perversion of Medicaid, creating an entitlement program for the middle-class.

The report, How to Fix Long-Term Care Financing, co-published by the Foundation for Government Accountability (FGA) and the Center for Long-Term Care Reform, found that the current structure of Medicaid has created a perverse incentive for middle-class and affluent seniors to plan their estates in order to qualify for the long-term care program.

“Federal law restricts long-term care eligibility to individuals with limited countable assets, but eligibility loopholes and home-equity exemptions provide a way for middle-class and affluent seniors to take advantage of the benefits program. These loopholes allow those with the means to plan for retirement and potential health-needs to take valuable funds away from needy individuals,” said Stephen Moses, Center for Long-Term Care Reform President.

“The current structure of Medicaid for long-term care is a blatant misuse of the public’s tax-dollars, and it’s ultimately hurting those it was designed to protect.”

According to the study, under current law, up to $560,000 in home equity is exempt from Medicaid’s asset limit on those applying for long-term care; in some states, the exemption is as high as $840,000. This exemption, which can be combined with other loopholes such as the rearranging of estates to hide funds, has led to the overuse and abuse of Medicaid, often at the expense of those who truly need the aid.

FGA President Tarren Bragdon noted that the study revealed just how damaging government benefits programs can be when misused and incorrectly structured.

“By creating an incentive to use Medicaid as a long-term care strategy for the middle class and allowing loopholes to be abused, the government is hurting entire populations in each state. Rather than allowing people to take advantage of the system, our elected-officials should promote work as a means to prosperity and promote personal responsibility. We must protect limited taxpayer resources for the truly needy,” said Bragdon.

The full text of How to Fix Long-Term Care Financing can be viewed here. For more information, please contact Stephen Moses at 425.891.3640.

The Foundation for Government Accountability is a non–profit, multi–state think tank that specializes in health care, welfare, and regulatory reform. To learn more, visit TheFGA.org.

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Updated, Monday, July 24, 2017, 9:39 AM (Pacific)

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LTC E-ALERT #17-024: LTC NEWS AND COMMENT

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:

Mississippi not talking about the wealthy people on Medicaid
UnitedHealth Group Predicts 50% Of Seniors Will Choose Medicare Advantage
Nine lifestyle changes can reduce dementia risk, study says
Ranking the States by Fiscal Condition 2017 Edition
Medicaid reductions off the table, as GOP turns to plan D: Let Obamacare 'fail' on its own
The US is losing ground when it comes to retirement security
Social Security trust fund will be depleted in 17 years, according to trustees report
Long-Term Care Insurance Association Reports 39 Percent Increase In Consumer Inquiries
What You Need to Know about the Social Security and Medicare Trustees Reports
How Much Should the Average American Save for Retirement?
Stressful experiences can age brain 'by years', Alzheimer's experts hear
Don't ignore this serious retirement threat

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Updated, Friday, July 21, 2017, 10:29 AM (Pacific)

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LTC BULLET: MY HISTORY OF LONG-TERM CARE FINANCING

LTC Comment: When economists and policy wonks get long-term care analysis wrong, we correct the record. Twenty-eight examples follow.

LTC BULLET: MY HISTORY OF LONG-TERM CARE FINANCING

LTC Comment: Next week we’ll announce publication of “How to Fix Long-Term Care Financing.” This new paper by Stephen Moses, published jointly with the Foundation for Government Accountability, lays to rest once and for all the myth that Medicaid requires impoverishment. More importantly, it explains why economists and policy analysts continue, despite overwhelming evidence, to purvey that fallacy and base poor policy proposals on it. Finally our new report explains how to fix long-term care in ways that will improve access and quality while reducing Medicaid costs substantially.

But first, this week, we give you the back story of the decade of analysis that led up to the new report. In 2005, Congress was considering legislation to prevent abuse of Medicaid long-term care benefits by middle class and affluent people. That year, I spent half time in Washington, DC talking to any interest groups, legislators and policy makers who would listen about how to improve Medicaid for the needy by diverting prosperous people into responsible LTC planning. At the same time, my co-founder of the Center for Long-Term Care Reform, Attorney David Rosenfeld, was staffing a key committee of Congress considering what to do about the Medicaid estate planning problem.

We were having an impact. The issue was in the news. Opposition grew vehement, but in the end we won a big victory. You’ll recall the Deficit Reduction Act of 2005 became law early in 2006. It put the first cap ever on Medicaid’s home equity exemption, lengthened and strengthened asset transfer look-back rules, eliminated the half-a-loaf loophole, reinstated LTCI partnerships, and did a dozen more valuable things to correct Medicaid eligibility problems. But it wasn’t a slam-dunk. The Vice President had to fly home from overseas to cast a tie-breaking vote in the Senate to pass DRA ’05.

Who opposed such good and needed legislation? Well, read on and you’ll find out. From early 2005 on, studies, articles and white papers poured out attacking the mounting evidence and arguments in support of controlling Medicaid LTC eligibility. As each one appeared, we addressed it, answered it and corrected it in a series of LTC Bullets that has continued to the present. These LTC Bullets are listed below. Read them and we believe you’ll receive a pretty good history of long-term care financing over the past twelve years. In any case, you will be fully primed to read and understand our new report when it’s released next week. You’ll see the battle is not yet won, but our goal—to give Medicaid long-term care back to the needy and help everyone else prepare to pay privately—is finally within reach.

LTC Bullet: Why Does Georgetown Dodge RAMs?, April 12, 2005
LTC Comment: A new report on home equity conversion from the Georgetown LTC Financing Project downplays the importance of reverse annuity mortgages (RAMs) for financing long-term care. We present an opposing view from the National Council on the Aging in this LTC Bullet.

LTC Bullet: Where There's Smoke, There's Fire, May 18, 2005
LTC Comment: A new report on Medicaid planning by the Georgetown LTC Project tells us more about that organization's research bias than about the critical topic of artificial impoverishment to qualify for publicly financed long-term care. More in this LTC Bullet.

LTC Bullet: LTC Bombshell, June 29, 2005
LTC Comment: Results from a poll of state Medicaid programs by a Congressional office with subpoena power may blow the lid off a carefully orchestrated cover-up of Medicaid planning abuses.

LTC Bullet: LTC Doubletalk, January 24, 2006
LTC Comment: Medicaid planners and their academic and media enablers are talking out of both sides of their mouths: asset transfers are rare but preventing them will devastate seniors. Say, what?

LTC Bullet: Georgetown, GAO and Kaiser: The Bermuda Triangle of Good LTC Policy, January 25, 2006
LTC Comment: LTC doubletalk is not the exclusive province of Medicaid planners and AARP lobbyists. Otherwise often reliable analysts get long-term care policy wrong too. More in this LTC Bullet.

LTC Bullet: Kaiser Cover-Up Continues, April 27, 2006
LTC Comment: Urban Institute "scholars," aided and abetted by the Kaiser Family Foundation, employed an underhanded straw man argument in the foundation's latest unsuccessful attempt to debunk the impact of Medicaid planning abuse.

LTC Bullet: Take Georgetown's Facts With a Big Grain of Salt, February 15, 2007
LTC Comment: Three new "fact sheets" from the Georgetown LTC Financing Project are spoiled by ideological bias. Click the link above to read our analysis.

LTC Bullet: GAO on LTCI Partnerships, June 20, 2007
LTC Comment: GAO drops the ball again on the issues of Medicaid, long-term care financing and private insurance.

LTC Bullet: KFF Misfires on LTCI, June 9, 2009
LTC Comment: A new study of private long-term care insurance published by the Kaiser Family Foundation fails in the usual, predictable ways.

LTC Bullet: The Enemy of LTC Truth, February 8, 2010
LTC Comment: Albert Einstein said "Unthinking respect for authority is the greatest enemy of truth." See how this principle applies to long-term care.

LTC Bullet: New LTCI Report: Research or Propaganda?, Tuesday, June 8, 2010
LTC Comment: Is a newly updated report on LTC insurance by the Congressional Research Service really research, or CLASS Act propaganda? You decide.

LTC Bullet: Nursing Home Spend Down Misunderstood and Late-Breaking LTCI Industry News, July 20, 2012
LTC Comment: A recent EBRI study that claims nursing home stays are wiping out Americans’ savings is based on a fallacy and mistaken. What’s really happening?

LTC Bullet: Medicaid Spend Down that Isn’t and Why it Matters, July 19, 2013
LTC Comment: Claiming “transitions” to Medicaid are evidence of catastrophic LTC asset “spend down” misrepresents the truth and should be publicly recanted. Click the link above to find out who, what, when, where and why.

LTC Bullet: Do the Rich Benefit from Medicaid?, August 23, 2013
LTC Comment: Biased reporting by AARP suggests the answer to the title question is “no,” but solider peer-reviewed scholarship says “yes.” Who’s right?

LTC Bullet: Who Gets Medicaid LTC?, March 28, 2014
LTC Comment: Is Medicaid a long-term care safety net for the poor, the middle class, even the affluent, all of the above? Questions remain, but answers abound.

Will Bipartisan LTC Policy Be Better?, April 11, 2014
LTC Comment: Heads up! Consensus is coalescing around a bipartisan long-term care financing solution. Let’s be hopeful, but wary in this LTC Bullet.

LTC Bullet: GAO Punts on Medicaid Planning, July 3, 2014
LTC Comment: Another GAO report underplays dramatic findings about the role, methods and extent of Medicaid planning and loose LTC eligibility rules.

LTC Bullet: IG Report Reveals Costly Medicaid Enforcement Failures, November 21, 2014
LTC Comment--The USDHHS Inspector General reports that many states failed to implement mandatory provisions in OBRA ’93 and/or DRA ’05 designed to discourage abuse of Medicaid LTC benefits.

LTC Bullet: IG Report Reveals Medicaid Estate Recovery Weakness, December 5, 2014

LTC Comment—A newly released USDHHS Inspector General report shows few states do Medicaid estate recoveries well resulting in a potential annual loss, we infer, of $2.5 billion. Details, numbers, and why it matters.

LTC Bullet: How Careless Economists Boosted LTC Risk, December 12, 2014
LTC Comment: We explain how Boston College economists generated poor long-term care planning advice that national media unfortunately amplified in this LTC Bullet.

LTC Bullet: Another LTCI Hit Job?, October 9, 2015
LTC Comment: What shall we make of this new attack on private long-term care insurance?

LTC Bullet: The Arrogance of LTC Analysts’ Elitism, December 4, 2015
LTC Comment: Arrogance, ideological bias and elitism spoil the recent research of abundantly endowed LTC analysts. We explain.

Three Cheers (But Two From the Bronx) for New BPC-LTC Recommendations, February 5, 2016
LTC Comment: The Bipartisan Policy Center’s new report on long-term care leads with LTCI (hear, hear!), but makes Medicaid even more tempting (boo!) and adds a new, expensive, mandatory government program (boo!) based on faulty premises. Our analysis and critique follow in this LTC Bullet.

LTC Bullet: LTC at a Crossroads, June 3, 2016
LTC Comment: Long-term care financing policy is at a critical crossroads and may take a wrong turn. We explain in this LTC Bullet.

LTC Bullet: Behind AHEAD, September 2, 2016
LTC Comment: The people and organizations advocating a new, compulsory, payroll-financed government program to fund catastrophic LTC expenses base their arguments on dubious sources and reasoning.

LTC Bullet: Who Isn’t Covered by Private Long-Term Care Insurance?, October 21, 2016
LTC Comment: Who is not covered by private LTCI is a much more interesting question, and harder to answer, than who is covered as we’ll explain in this LTC Bullet.

LTC Bullet: The LTC Wars (shawsky), February 24, 2017
LTC Comment: The self-styled conservative LTC Commission co-chair has declared war on government-financed long-term care proposing private sector solutions that mirror our own.

LTC Bullet: Home Equity and LTCI Demand, June 30, 2017
LTC Comment: We affirm and confirm Professor Thomas Davidoff’s observations on the connection between home equity and LTC insurance demand in this LTC Bullet.

LTC Bullet: Medicaid, Home Ownership and Long-Term Care Financing, July 7, 2017
LTC Comment: Medicaid’s estate recovery requirement induces aging Americans to reduce home ownership and decrease home equity in order to qualify for Medicaid long-term care benefits: we explore how this occurs and to what extent in this LTC Bullet.

LTC Bullet: Is it Spend Down or Medicaid Planning?, July 14, 2017
LTC Comment: A lot of what passes for Medicaid “spend down” in the scholarly literature is really Medicaid planning. We explain and give examples in this LTC Bullet.

LTC Comment: That’s it for now, folks. See how we put it all together in our new report next week.

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Updated, Monday, July 17, 2017, 10:11 AM (Pacific)

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LTC E-ALERT #17-017: LTC NEWS AND COMMENT

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 the Medicaid Debate Affects Long-Term Care Insurance Decisions
Medicare’s hospital trust fund will run out of money in 2029
NIC: Assisted Living Occupancy Plummets to Record Low
California government retirement plans are more than 50% underfunded
Chocolate consumption could improve cognitive function
New BPC Report Suggests Fixes to LTC Financing Challenge
Medicare, Medicare Advantage physician rates nearly equal
Aging in America: Crisis in long-term care
Thinking Boomer: Understanding This Generation and What They Need From You
Insurance pays little for caregiving of elderly at end of life
2 of 3 Americans Don't Have 'Advance Directive' for End of Life
One Woman’s Slide From Middle Class to Medicaid

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Updated, Friday, July 14, 2017, 9:59 AM (Pacific)

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LTC BULLET: IS IT SPEND DOWN OR MEDICAID PLANNING?

LTC Comment: A lot of what passes for Medicaid “spend down” in the scholarly literature is really Medicaid planning. We explain and give examples after the ***news.***

*** AEI PANEL ON 2017 MEDICARE TRUSTEES REPORT: If you’re ready to wrap your brain around Medicare’s fiscal problems and their impact on America’s financial crisis, you could not do better than to spend an hour and a half watching the American Enterprise Institute’s Joe Antos and a panel of experts discussing the latest Trustee’s report just released. The video will be available here within 24 hours from the live presentation this morning.

In the meantime, in case you don’t think what happens to Medicare matters much for long-term care, then consider the following LTC Clipping we sent this morning to subscribers. By the way, if you’re not tuned into the LTC Clippings yet, be sure to contact Damon at 206-283-7036 or damon@centerltc.com about subscribing.

7/13/2017, “Medicare’s hospital trust fund will run out of money in 2029,” by Carolyn Y. Johnson, Washington Post

Quote: “The trust fund that pays Medicare's hospital expenses will run out of money in 2029, a year later than the most recent projection, according to a federal report. The Social Security program will remain solvent until 2034, a projection unchanged from last year. The annual report from the Social Security and Medicare board of trustees provides a snapshot of the long-term solvency of the federal government's two biggest entitlement programs.”

LTC Comment: Oh, so no problem, right? We have a decade or two to deal with these problems. Hmmm, well, no. Both Social Security and Medicare are already consuming their “trust funds” which contain nothing but IOUs from the general fund, meaning the federal government has to borrow to pay back what it has already spent. As well, it’s not like the problems that created this premature insolvency are getting better. It all hits the fan in the 2030s when boomers start turning 85 and needing LTC in huge numbers. That brings Medicaid into the mix and Medicaid is a hopeless case if Medicare stops propping it up with generous provider reimbursements and Social Security cuts payments by 25% to recipients who must turn over their income to cover Medicaid costs. Oh man, don’t get me started! ***

LTC BULLET: IS IT SPEND DOWN OR MEDICAID PLANNING?

LTC Comment: Several economists have published excellent research showing how the availability of Medicaid affects consumers’ financial behavior and demand for long-term care insurance. We explored examples of this work in each of the past two weeks:

LTC Bullet: Medicaid, Home Ownership and Long-Term Care Financing (7/7/17) discussed dramatic evidence that Medicaid’s estate recovery requirement induces aging Americans to reduce home ownership, decrease home equity, and set up trusts in order to qualify for Medicaid long-term care benefits.

LTC Bullet: Home Equity and LTCI Demand (6/30/17) explored the thesis that home equity “substitutes” for long-term care insurance demand and suggested instead that Medicaid’s large home equity exemption obviates LTCI demand by eliminating home equity’s liability for long-term care costs.

The economists who wrote both of the articles reviewed in those Bullets got key aspects of Medicaid asset spend down wrong. The first assumed that Medicaid requires assets to be spent for care, but that is not the case as any amount of countable resources can easily be converted to exempt resources. The second assumed that Medicaid spend down is an onerous process and leads to deficient care, neither of which outcomes necessarily occurs if the spend down is managed by a Medicaid planner.

So what? I think that in both of these cases, the economists’ findings about the impact of Medicaid on financial planning behavior would have been much stronger if they had taken into account the ease with which even affluent people structure their income and assets before and after care is needed.

Today and in future weeks, we will review the work of other economists regarding Medicaid and long-term care to see how they treat the spend down issue. We’ll keep this question always in mind: “Is it spend down or Medicaid planning?” We seek an explanation of why economists and health policy analysts tend to equivocate on the meaning of Medicaid spend down. Why do they ignore the evidence of widespread Medicaid planning and therefore underestimate the impact of Medicaid on asset accumulation or decumulation and long-term care insurance demand?

Today, we consider an often-cited article by economist Norma B. Coe titled “Financing Nursing Home Care: New Evidence from Spend Down Behavior,” Tilburg University, 2007. What follows are quotes from the article followed by our comments.

Coe: “I find that the elderly shift their consumption and savings decisions in response to Medicaid. Single households have lower net worth through the median of the distribution due to Medicaid policy. On the other hand, I find that married households do not lower their total net worth, but they change their relative holdings of protected and non-protected assets.” (Abstract, p. 1)

LTC Comment: That sure sounds like Medicaid planning at work, doesn’t it? Singles jettison wealth whereas couples, over whom Medicaid financial limits are less stringent, convert countable assets into exempt resources. Surely the body of the article will explore this process. But, no.

Coe: “Medicaid covers long-term care, but only after most private savings have been exhausted.” (p. 2)

LTC Comment: Exhausted? How? The presumption is that savings are spent down for care. But Medicaid does not require that. A vast peer-reviewed legal literature explains how to “exhaust” savings to qualify for Medicaid without spending on care. Surely the article will review and explore the ramifications of that literature and those techniques. But, no.

Coe: “I explore two major avenues available to households to shift more of the cost of a nursing home stay to the government. The first is available to all households, and it is to simply lower your net worth. The second is available to single households in select states and all married couples, and that is to put more money in housing assets, which are protected from the Medicaid program.” (pps. 2-3)

LTC Comment: Now that’s a promising start. Unfortunately, we learn nothing more about how single people and married couples lower their net worth and put money into exempt housing assets. Is it spend down or Medicaid planning? For example:

Coe: “Medicaid . . . will pay for an unlimited amount of nursing home care, regardless of the underlying cause or the ability to recuperate. This insurance is not free: Medicaid is means-tested, and generally speaking, the eligibility rules require spending most of a household’s accumulated assets before coverage can start.” (p. 4)

LTC Comment: That is simply not true. Medicaid eligibility rules do not require spending most accumulated assets before coverage can start. Besides the fact that one can convert countable to non-countable assets without spending down anything, the vast majority of Medicaid applicant/recipients’ wealth is already held in exempt resources like the home and auto. On top of that, recipients can retain without any dollar limit a business including the capital and cash flow, IRAs in payout status, term life insurance, prepaid burial plans, home furnishings and personal belongings. Finally, for people who still own too much countable wealth to qualify, there are sophisticated legal methods to shift wealth away from spend down liability. If Medicaid induces reductions in net worth or conversion of wealth to exempt status, how much more so does it do that if you take these Medicaid planning techniques into consideration.

Coe: “A QIT [qualified income trust] is a ‘sheltering’ device, but it only shelters income to meet the eligibility criteria.” (p. 7)

LTC Comment: Here Dr. Coe veers into discussing one actual Medicaid planning technique. QIT’s, AKA Miller income diversion trusts, allow people in income cap states to divert excess income temporarily so they can become eligible for Medicaid LTC benefits despite having incomes above, often far above, the state’s limit. Thanks to QITs, the rule of thumb throughout the USA, whether in medically needy or income cap states, is that anyone with income below the cost of a nursing home, at least several thousands of dollars per month, can qualify for Medicaid long-term care benefits based on income.

Coe: “Any assets not allocated to the community spouse are allocated to the institutionalized spouse, who must spend them down to the state resource limit for a single individual before becoming eligible for Medicaid.” (p. 9)

LTC Comment: Here again, this time discussing the special rules to protect spouses from impoverishment, the reference is to the institutionalized spouse’s need to spend down excess resources. The unspoken presumption is that such resources must be spent for care. There is no acknowledgement of other options to reach the eligibility limits, such as the many methods of Medicaid planning.

Coe: “There are limits to how one may eliminate assets to qualify for Medicaid.” (p. 10)

LTC Comment: That sounds promising, but the following section discusses only Medicaid’s largely ineffective asset transfer rules without addressing the many highly effective ways people actually use to shelter or divert assets in order to qualify for Medicaid.

Coe: “While this set-up is done to minimize the government’s burden for nursing home care, it does set up an interesting incentive scheme. If one enters a nursing home and cannot self-fund the entire cost and therefore needs to go on Medicaid, there is an implicit 100% tax on all income and assets over the protected limit. If there is no difference, psychological or in actual care between having public funds or private funds pay for a nursing home, the optimal decision is to consume all wealth over the protected amount in the previous period and then let Medicaid pay for all nursing home costs.” (p. 11)

LTC Comment: No, there is not a 100% tax. In fact, people can have their cake (retain exempt assets or use a more elaborate Medicaid planning method, such as a reverse-half-a-loaf transfer, a Medicaid friendly annuity, or a trust) and eat it too (qualify for Medicaid LTC benefits while retaining or diverting wealth to others).

Is that point mitigated if, as is widely acknowledged, care financed by Medicaid means lesser quality and fewer choices? No, because of the “key money” planning technique. Medicaid planners advise their affluent clients to hold back some cash (key money) so they can pay privately for a while. That guarantees the clients red-carpet access to top quality facilities and care because long-term care providers are desperate to attract non-Medicaid residents paying the full private market rate. Consequently, poor people, without the means to buy their way into the better facilities, end up in the more typical high-Medicaid-census homes that have earned the program’s dubious reputation.

Coe: “Two financial activities that could be influenced by Medicaid policy are inter-vivos transfers and trust formation, which I do not address directly in this paper.” (p. 12)

LTC Comment: A promising turn, but unfortunately, trusts and transfers are not the major Medicaid planning methods, although they are the ones analysts tend to focus on, probably because data about them is more readily available, and the analysts are not familiar with the many other methods of or the extensive legal literature about Medicaid planning.

Coe: “Stum (1998) conducted in-depth interviews using open-ended questions to understand how the family members view and experience the reality of financing long-term care, including the spend-down process. She found that buying prepaid burial trusts and one-time gifts to children ranging from $500 to $8,000 were the most common behavioral responses to imminent spend-down.” (p. 12)

LTC Comment: This is more promising, because exempt pre-paid burial plans, according to the many Medicaid eligibility workers and supervisors I’ve interviewed, are the single most common Medicaid planning method. They occur in 65% to 85% of all Medicaid long-term care cases usually averaging $8,000 to $10,000 per case. State Medicaid eligibility staff often recommend that applicants purchase burial plans instead of spending their remaining countable funds on private care. This exemption constitutes a huge subsidy to the funeral industry at the expense of Medicaid, taxpayers and long-term care providers. Although the most common of all Medicaid planning methods, sheltering funds in prepaid burial plans is only one of many similar approaches.

Coe: “The data I use for this project are the 1995-2000 waves of the Assets and Health Dynamics of the Elderly (AHEAD). The AHEAD is a nationally representative panel survey of households with heads at least age 70 in 1993. By design, the AHEAD over samples African- Americans, Mexican-Americans, and Floridians. The AHEAD follows people over time regardless of institutionalization, divorce, or remarriage.” (p. 17)

LTC Comment: Using this data source raises serious questions and problems as I explained in LTC Bullet: Behind AHEAD (9/2/16). For example, there are many reasons why AHEAD respondents and their representatives might fail to report income and assets to surveyors or even purposefully misrepresent the facts. People who have reconfigured their wealth in order 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 their self-interested loved ones. Heirs who benefit from preserving parents’ estates may prefer to conceal the facts. Lawyers who do Medicaid planning are protected from disclosure by attorney/client privilege. Long-term care providers and Medicaid eligibility staff, who often know, especially in small rural communities, which wealthy locals are taking advantage of Medicaid, often seethe, but cannot disclose the information because of legally enforced confidentiality. Getting to the truth in such matters is extremely difficult.

Coe: “The Medicaid rules are intricate and interact with each other to create variations in eligibility and benefit generosity. Therefore it is difficult to examine the effects of Medicaid on behavior using each rule independently, or looking at only one aspect of the plan, such as the presence of a Medically Needy program or the value of the CSRA. Instead, it is necessary to use a summary measure for the overall generosity of the state’s Medicaid program. I use three different summary measures.” (p. 20)

LTC Comment: In fact, there is very little difference in the overall generosity of states’ Medicaid programs when you factor in Medicaid planning methods. For example, so what if one state imposes the usual $2,000 limit on countable assets and another permits five times that much, when federal law and regulations allow virtually unlimited exempt assets to be retained? While there is some variation in state Medicaid eligibility rules, DeNardi, French and Jones concluded there was “little practical difference in Medicaid eligibility across the different states,” largely as a result of medical and long-term care expense deductions.^{^[1]}

Closing LTC Comment: Economist Norma Coe’s basic point is correct and very important. Because Medicaid exists as a payor of last resort, aging Americans structure their wealth to maximize eligibility for the program’s long-term care benefits. But Dr. Coe, and her colleagues who have made the same observation, miss the full import of their findings because they do not know and hence cannot explain how Medicaid’s extremely elastic and manipulable eligibility rules facilitate eligibility, desensitize the public to long-term care risks and costs, and result in most people ending up uninsured privately and dependent on public assistance--whether they genuinely “spend down” or not.

[1] De Nardi M, French E, Jones JB, Gooptu A. Medicaid and the elderly. Econ Perspect. 2012;36:17-34; [LINK]

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Updated, Monday, July 10, 2017, 9:59 AM (Pacific)

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LTC E-ALERT #17-024: LTC NEWS AND COMMENT

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:

Serious head injuries nearly double your risk of dementia
Falls associated with higher rate of adverse events than previously thought
Can poor sleep lead to Alzheimer's?
Poor Patient Care at Many Nursing Homes Despite Stricter Oversight
Older adults increasingly using mobile devices to access information
Views: How to protect workers’ retirement with LTC benefits
Medicaid and the Undeserving Rich
Solutions to Long-Term Care Financing in Politically Challenging Times
New technology aims to provide peace and positive stimulation to dementia patients
Guess What? There Are No Cuts in Medicaid
No One Wants To Be Old’: How To Put The ‘Non-Age’ in Nonagenerian
Helping elderly gain financial security
SNFs, Medicaid and Healthcare Reform
Dementia patients may die sooner if family caregivers are mentally stressed
‘White Americans’ Mortality Rates Are Rising. Something Similar Happened in Russia from 1965 to 2005
Medicaid Cuts May Force Retirees Out of Nursing Homes

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Updated, Friday, July 7, 2017, 9:50 AM (Pacific)

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LTC BULLET: MEDICAID, HOME OWNERSHIP AND LONG-TERM CARE FINANCING

LTC Comment: Medicaid’s estate recovery requirement induces aging Americans to reduce home ownership and decrease home equity in order to qualify for Medicaid long-term care benefits: we explore how this occurs and to what extent after the ***news.***

*** SUBSCRIBE TO LTC CLIPPINGS: We read everything relevant to LTC services and financing so you don’t have to. I spend several hours a day patrolling the online and print literature looking for key articles, reports, findings, data and ideas. Ninety-five percent of what I review is not worth your time. But the other five percent is critical to keeping me and you at the forefront of professional knowledge and expertise. It is that five percent we send you in an average of two emails per work day conveying a date of publication, title, author, source, hyperlink, representative quote and our one or two sentence analysis, or “spin” if you wish.

When LTCI expert and producer Maryglenn Boals commented on the following LTC Clipping, she elaborated with examples from her long and wide earlier experience as a nursing home administrator and then said “I am submitting a proposal to present at the 2018 American Society on Aging conference and these news clippings are providing a lot of material! Thanks for all you do!”

We invite you to subscribe to LTC Clippings and supercharge your access to everything you need to know. Contact Damon at 206-283-7036 or damon@centerltc.com.

LTC Clipping:

7/5/2017, “Poor Patient Care at Many Nursing Homes Despite Stricter Oversight,” by Jordan Rau, New York Times

Quote: “While special focus status is one of the federal government’s strictest forms of oversight, nursing homes that were forced to undergo such scrutiny often slide back into providing dangerous care, according to an analysis of federal health inspection data. Of 528 nursing homes that graduated from special focus status before 2014 and are still operating, slightly more than half — 52 percent — have since harmed patients or put patients in serious jeopardy within the past three years. . . . Yet, despite recurrences of patient harm, nursing homes are rarely denied Medicare and Medicaid reimbursement.”

LTC Comment: Most nursing homes rely primarily on reimbursement from Medicaid at less than the cost of care. So it’s no wonder care quality suffers, but Medicaid can’t always deny reimbursement. Who would provide care of any quality if it did? The only answer is to stop trapping the middle class on Medicaid and pull more private financing at market reimbursement rates into long-term care. No amount of “oversight” can make up for inadequate funding. ***

LTC BULLET: MEDICAID, HOME OWNERSHIP AND LONG-TERM CARE FINANCING

LTC Comment: Does Medicaid’s estate recovery mandate cause people to reduce their home ownership and equity in contemplation of qualifying for the program’s long-term care benefits?

That’s the question a Syracuse University economics graduate student (now a Kent State Associate Professor of Economics) set out to answer in 2009. Her conclusion is one of the most important articles in the economics and health policy literature bearing on long-term care financing, to wit:

Nadia Greenhalgh-Stanley, “Medicaid and the housing and asset decisions of the elderly: Evidence from estate recovery programs,” Journal of Urban Economics, Vol. 72, 2012, pps. 210-224.

By all means, read the full article. What follows here are key quotes from it with our comments further drawing out the ramifications for Medicaid and long-term care insurance.

NGS: “Using data from 1993 to 2004 in the Health and Retirement Study on elderly individuals, I find that state adoption of estate recovery programs makes the elderly decrease homeownership by 4.6%, decrease home equity by 15%, and also decrease the housing share of the elderly wealth portfolio. State adoption of these programs results in elderly baseline homeowners being 33% less likely to own their homes at death and more likely to use a trust as a substitute to housing in order to preserve assets and carry out bequest motives at death.” (Abstract, p. 210)

LTC Comment: What this means is that whether they do it consciously or not, people respond to states’ implementation of Medicaid estate recovery programs by reducing their home ownership and equity substantially and by finding other means than Medicaid’s previously unencumbered home equity exemption to protect their wealth from long-term care risk and cost. But the numbers are even more significant than they may seem at first.

NGS: “While 4.6% may seem like a small percent effect, it is actually quite large when measuring a change in the homeownership rate. . . . [Federal laws] to incentivize and increase homeownership are often deemed to be successful if they can change homeownership by a mere 1% or more. . . . Clearly finding a homeownership change of 3–5% is a very large impact and therefore, the 4.6% decrease in the homeownership rate for the elderly is economically significant.” (p. 217)

LTC Comment: What about the 15% decrease in home equity? How meaningful is that?

NGS: “When considering how big these changes in home equity are, it is important to consider their size in comparison to other findings in the literature, specifically in comparison to maintenance and depreciation. I estimate state adoption of these laws decreased home equity by 15%. Putting this into further perspective, Harding et al. (2007) find that home equity decreases at a rate of 2.5% per year gross of maintenance and decreases at a rate of 2% per year net of maintenance. This further shows that I am measuring a very substantial impact on home equity.” (p. 218)

LTC Comment: What about the use of a “trust as a substitute to housing in order to preserve assets and carry out bequest motives at death.” (p. 210)

NGS: “The total impact of recovery, the sum of TEFRA [Tax Equity and Fiscal Responsibility Act of 1982] liens and ERP [estate recovery program] coefficients, is an increase in trust participation at death of 63.1%.” (p. 221)

LTC Comment: So, what do these dramatic findings mean for long-term care financing?

NGS: “When facing these large and uncertain expenses of a nursing home and long-term care, which are the type of expenses older individuals should insure themselves against, the elderly have four options for insurance. First, they can self-insure by accumulating assets as a buffer for these uncertain future nursing home costs. Secondly, they can self-insure by having their kids provide informal long-term care services, which can be carried out through either intergenerational or inter vivos transfers, in which care is provided in exchange for bequests. Third, they could buy market services in the form of private long-term care insurance. . . . Finally, they can use government provision of insurance. Once the government intervenes in the provision of long-term care insurance, crowd-out of private behavior becomes an issue. The extent to which social insurance crowds out private behavior is a perennial topic in economics.” (p. 211)

LTC Comment: So, how exactly might public funding of long-term care inhibit savings and private insurance against that risk and cost?

NGS: “In this situation, government crowd-out of private behavior can happen in two ways. First, after the availability of government insurance, individuals who previously had chosen to self-insure through the accumulation of assets would anticipate the government coverage and decide to accumulate fewer assets. In other words, there would be an implicit spenddown of assets due to the expectation of government financed insurance, which could be carried out through higher consumption in the years prior to a nursing home. Second, Medicaid’s role as a payer of last resort may directly crowd out demand for private long-term care insurance, see Brown et al. (2007) and Brown and Finkelstein (2008).” (p. 211)

[NB: These Brown and Finkelstein articles showed that availability of Medicaid long-term care benefits after care is already needed crowds out between two-thirds and 90 percent of the demand for private LTC insurance.]

LTC Comment: Now, to show how and why people might reduce their income and assets in preparation for potential future Medicaid long-term care eligibility, Professor Greenhalgh-Stanley turns to a discussion of Medicaid eligibility and spend down rules. In this section I believe she erred in ways that undercut the full significance of her dramatic findings.

NGS: “Spend-down of assets occurs as individuals are required to contribute liquid resources toward the cost of their care until the typical state threshold of $2000 is reached. Importantly, this limit excludes the home and primary vehicle.” (p. 211)

LTC Comment: Actually, there is no such rule. Medicaid does not require that assets be spent down for care. The only requirement is that spent assets receive “fair market value” in the exchange. So, to reach the $2000 asset threshold, people can and often do, purchase exempt assets, which include far more than just the “home and primary vehicle.” Some additional examples of exempt assets unlimited by any dollar amount are one business including the capital and cash flow, IRAs in payout status, term life insurance, prepaid burial funds, home furnishings and personal belongings. (I sourced these exemptions to their roots in federal law and regulations in “Medi-Cal Long-Term Care: Safety Net or Hammock?,” 2012, pps. 20-21.) Medicaid planning attorneys have long check lists of exempt assets which they encourage their clients to purchase in lieu of spending money on long-term care. By assuming incorrectly that people must spend down their savings for care, the author overstates the difficulty of qualifying for Medicaid long-term care benefits and therefore understates the significance of her finding that people structure their assets to qualify for Medicaid.

I should also point out the irony that many people convert countable assets such as cash, stocks or bonds into exempt home equity by remodeling a home, buying a more valuable house, or prepaying a mortgage. This is the opposite of the home equity decumulation behavior Dr. Greenhalgh-Stanley identifies, but it has the same effect of accelerating eligibility for Medicaid benefits. Are not people who do this vulnerable to estate recovery, however? Not likely, as federal law and regulations make estate recovery quite difficult and the same Medicaid planners who facilitate eligibility in the first place also utilize every legal means to avoid estate recovery for their clients as well. If it were not for this countertrend adding to home equity among aging homeowners, the author probably would have found even more reduction in home ownership and equity ahead of needing long-term care.

NGS: “Spend-down of income occurs as an individuals’ excess income, defined as income above the state’s income threshold, is placed toward the cost of their care.” (pps. 211-212)

LTC Comment: Now, that statement is correct. Medicaid does require income to be spent for care (or other health-related expenses including insurance premiums) down to the states’ income eligibility limits. Probably, this requirement regarding income is the source of the confusion regarding spend down of assets, which error occurs often in the health policy literature.

NGS: “Conclusion: Medicaid’s higher implicit tax of holding owner-occupied housing from state adoption of ERPs and TEFRA liens induced three primary behavioral changes as follows: the elderly to decrease their homeownership while alive and at death, decrease home equity and the housing share of the wealth portfolio, and increase trust participation at death.” (p. 221)

LTC Comment: Well, yes, very dramatic results. But the full reality is much greater still. Aging Americans jettison much more than home equity to qualify for Medicaid. When they decrease the “housing share of the wealth portfolio,” they employ many ways to exempt that newly-non-housing wealth from Medicaid spend down rules as well. How? To learn that you need to be familiar with a large and growing formal legal literature on Medicaid planning. Since 1981, in hundreds of legal treatises, peer-reviewed journal articles, and popular media outlets, elder law attorneys have trained their colleagues and shown their clients how to qualify quickly and easily for Medicaid long-term care benefits without spending down savings for care. Unfortunately, most economists and health-policy-analysts are unfamiliar with that literature. So they vastly underestimate the impact of easy access to Medicaid after care is needed on financial planning, saving, investment, insurance and wealth decumulation behavior by the aging.

Closing LTC Comment: I wrote the following excerpt in a 1988 DHHS Inspector General Report titled “Medicaid Estate Recoveries: National Program Inspection,” five years before Congress and President Clinton accepted that report’s recommendations and made estate recoveries mandatory. The decades since have shown, as Dr. Greenhalgh-Stanley’s article ratifies, that estate recoveries influence consumer behavior as regards wealth management and long-term care planning. If state Medicaid programs had implemented estate recoveries more fully; if the federal government had enforced the mandate more effectively; and if the media had publicized estate recovery so more people knew about it while they were still able to save, invest or insure for long-term care, more of the salutary outcomes I predicted would have occurred. But that’s not how history played out. So I’ve come to believe the only solution is to reduce or eliminate Medicaid’s home equity exemption so that people with significant real wealth utilize reverse mortgages to pay for their long-term care until they become genuinely needy and properly eligible for public assistance. I’ve written at length elsewhere about the benefits that would accrue from implementing such a reform.

Excerpt from “Medicaid Estate Recoveries: National Program Inspection,” Department of Health and Human Services, Office of Inspector General, Office of Analysis and Inspections, Region IX, Seattle, Washington, June 1988.

“A large nontax revenue source generated by Medicaid estate recoveries could be recycled to help the truly destitute. It is possible, however, that enhanced estate recoveries would have more far-reaching effects on long-term care funding. Faced with the certainty--which is almost nonexistent today--that accepting care from Medicaid means paying back the cost out of one’s estate, people might seek other alternatives. Such alternatives include Social Health Maintenance Organizations (SHMO's), continuing care communities, targeted savings accounts and private long-term care insurance. To pay for these nonpublic assistance options, the elderly would have to turn more to private home equity conversion or to assistance from their adult children. It is their children, after all, who stand to inherit whatever property remains after the costs of long-term care are paid and who currently reap the windfall of Medicaid subsidies. We must emphasize that the issue is enrichment of nonneedy adult heirs, not denial of care to the elderly. For those who opt to rely on Medicaid, or have no other choice, eligibility conditional upon a promise (secured by an automatic lien) to repay benefits from their estates would assure all elderly people of (1) access to care, (2) retention of home property as long as it is needed by spouse and dependents, and (3) the dignity of paying their own way in the end.” (pps. 47-48)

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Updated, Friday, June 30, 2017, 9:50 AM (Pacific)

Seattle—

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LTC BULLET: HOME EQUITY AND LTCI DEMAND

LTC Comment: We affirm and confirm Professor Thomas Davidoff’s observations on the connection between home equity and LTC insurance demand, after the ***news.***

*** LTC CLIPPINGS SERVICE: The Center for Long-Term Care Reform’s Clippings Service is an excellent way to stay on top of current and critical long-term care news without having to spend hours a day researching on the internet. We send our Clipping Service subscribers an average of 2 emails per workday with a must-read-article link, a pull quote and some brief analysis. We’re sensitive to the fact that we all receive too many emails, so we’re very careful to send along only the most important LTC news items. To inquire, feel free to contact us directly at 206-283-7036 or info@centerltc.com. Please enjoy this example of a recent LTC clipping:

6/28/2017, “Guess What? There Are No Cuts in Medicaid,” by Daniel J. Mitchell, Foundation for Economic Education (FEE.org)

Quote: “Senate Republicans have produced their Obamacare repeal legislation, though as I noted at the end of this interview, it’s really more a bill about Medicaid reform than Obamacare repeal. While it’s disappointing that big parts of Obamacare are left in place, it’s definitely true that Medicaid desperately needs reform, ideally by shifting the program to the states, thus replicating the success of welfare reform. But critics are savaging this idea, implying that ‘deep cuts’ will hurt the quality of care. Indeed, some of them are even engaging in poisonous rhetoric about people dying because of cutbacks. There’s one small problem with the argument, however. Nobody is proposing to cut Medicaid. Republicans are merely proposing to limit annual spending increases. Yet this counts as a ‘cut’ in the upside-down world of Washington budgeting.”

LTC Comment: Thanks to GoldenCareUSA’s Lori Fjelstad for tipping us to this excellent article. Orwellian doublespeak lives on. ***

*** THIS JUST IN FROM ILTCI:

Save the Date! The 2018 ILTCI Conference will be held at the Paris Las Vegas in Las Vegas, NV March 18-21, 2018.

We have secured a $99/night room rate (plus resort fee) for our attendees. Exhibitor/Sponsor applications and the new website will launch in mid July.

IMPORTANT: It has come to our attention that someone has been spoof/phishing from an email address ending in iltciconf.com. Please note that all legitimate emails from ILTCI will come from our .org address. We are taking the appropriate steps to have the spoof site removed. Please do not click any links or download any files sent from an iltciconf.com email. Please do report them as spam. If you do, or have, received one of these emails let me know. ***

LTC BULLET: HOME EQUITY AND LTCI DEMAND

LTC Comment: Home ownership is high among the elderly, even among the income-poor elderly. Home equity, what’s left of a home’s value after deducting liens against it, is also high among these groups, because they carry relatively little mortgage debt. Often, the quantity of home equity held exceeds the actuarially probable cost of needing long-term care. So it is reasonable to ask whether or not people with substantial home equity might be relatively less likely to purchase private long-term care insurance. Does home equity substitute for LTC insurance demand?

That’s the question Professor Thomas Davidoff asked in a paper titled “Home Equity Commitment and Long-Term Care Insurance Demand” published in the Journal of Public Economics, February 2010. We affirm his conclusion that home equity deflates LTCI demand, but we also confirm it from a different angle through observations about Medicaid’s generous long-term care financial eligibility rules.

What follows are quotes from Professor Davidoff’s paper followed by our comments.

Davidoff: “If housing is a poor substitute for other goods and housing consumption falls when ill, then demand for long-term care insurance (LTCI) will be weaker than it would be with equivalent wealth allocated freely across housing and other goods independent of health.”

LTC Comment: Housing wealth is relatively illiquid so it’s not a simple substitute for other goods. We know people are more likely to sell their homes after they enter institutional long-term care than before. But if housing wealth were easily convertible to other goods and if liquidation of housing wealth were not tied so closely to needing long-term care, then perhaps people would be more likely to protect that wealth with private insurance. But why wouldn’t most people insure against the risk of losing their housing wealth, illiquid or not, in case they need long-term care in the future? That’s where the author goes next.

Davidoff: “At high wealth and income levels, running down assets to qualify for Medicaid is a difficult and unappealing prospect. The quality of care and facility amenity that Medicaid will cover is also lower than the rich may be willing to tolerate: Ameriks et al. (2007) present survey evidence suggesting that the elderly are highly motivated to avoid low quality facilities in the event of illness. Still, among retirees in the 2004 wave of the HRS, LTCI coverage is below 25% even in the highest wealth decile. Home equity is a particularly plausible substitute for LTCI among wealthier households, who typically have home equity holdings that are large relative to most of the distribution of long-term care costs.” (p. 4)

LTC Comment: So, two reasons home-equity-wealthier people do not buy LTC insurance are that spending down to Medicaid income and asset levels is undesirable and avoiding Medicaid’s poor quality care and facilities is preferable, but nevertheless only a quarter of the wealthiest people buy LTC insurance. Conclusion: home equity is substituting for LTCI.

No doubt, but I think there is a simpler, more powerful explanation. Medicaid exempts the home and all contiguous property up to a minimum of $560,000 and in 13 states, to a maximum of $840,000. Even the unoccupied homes of single Medicaid recipients remain exempt as long as the recipient or his or her representative expresses the recipient’s subjective intent to return to the home, regardless of whether or not a return to the home is medically feasible. If home equity, seniors’ largest and most widely held asset, is not at risk for long-term care, why would we expect people of whatever level and type of wealth to buy long-care insurance? To my mind, the real issue is not that home equity is a substitute for LTCI, but rather that Medicaid obviates the LTC risk to home equity.

But what about the hassle of spending down and Medicaid’s dismal reputation for poor access and quality? Most people don’t think about those things until they need expensive long-term care and the only choice remaining then is to pay for it out of pocket or qualify for Medicaid. Out-of-pocket payment for long-term care has plummeted from around 50% to roughly 25% in the half century Medicaid has been paying for nursing homes. Half of the remaining 25% is really spend-through of Social Security income, i.e. not savings, by people already on Medicaid who have to contribute their income to offset Medicaid’s cost for their care. Furthermore, loss of choice of care venue and poor quality may be less off-putting once care is needed and Medicaid is available to pay. By that point, decisions about asset protection and choice of payor may no longer be in the infirm elder’s control but may rather be made by adult children, heirs with a stake in the outcome.

Davidoff: “Home equity is a plausible substitute for LTCI only if it is large relative to long-term care costs and if its payouts are highly correlated with the state of being in long-term care. (p. 4) . . . For a large share of surveyed older households, home equity is large relative to both total wealth and likely long-term care expenses. (p. 5) . . . Exiting home ownership, trading down owner housing and moving to renting are all uncommon except in the case of a need for long-term care.” (p. 6)

LTC Comment: The evidence mounts and he backs it up with longitudinal data from the highly regarded HRS/AHEAD surveys. But then he makes this statement.

Davidoff: “In the top quintile of the total wealth distribution, where Medicaid is unlikely to be salient, 84% of respondents report home equity over $100,000.” (p. 5)

LTC Comment: Medicaid may be less salient in the upper wealth quintile, but definitely not “unlikely.” As we showed in “LTC Bullet: Hoist with its Own Petard,” Friday, April 28, 2017, Medicare beneficiaries up to the 95^th percentile can and often do qualify for Medicaid LTC benefits based on income and savings limits if their LTC, medical and insurance expenses are high enough. The 95^th percentile for home equity is $466,600, well below Medicaid’s minimum home equity exemption. Research published in the American Economic Review found not only that retirees with high incomes can enroll in Medicaid, but that when they do, the cost to taxpayers is actually higher than the cost for low-income individuals.^{^[1]} So, Medicaid LTC eligibility after the need for long-term care has occurred remains an option for all but the very wealthiest people.

Now Professor Davidoff makes a fascinating observation and reaches a highly significant conclusion.

Davidoff: “Important for modeling purposes is whether homeowners in long-term care sell their homes due to cash need or because the need for care eliminates the disutility associated with selling the home. There is some evidence that the latter explanation is more salient.” (p. 6)

LTC Comment: Wait, if people are selling their homes to pay for long-term care, isn’t that prima facie evidence the sale is for “cash need”? If they are only selling because they don’t need the home for a residence any longer and may as well redirect their real estate wealth to other purposes, doesn’t that suggest their long-term care costs are covered by other means, most likely Medicaid? GAO found that Medicaid is not very good at tracking and taking into account recipients’ assets and exchanges.^{^[2]} Medicaid planners, lawyers who specialize in artificially impoverishing affluent clients to qualify them for Medicaid LTC benefits, employ numerous ways to make such funds disappear as we’ve explained and confirmed in numerous state- and national-level studies here: http://www.centerltc.com/reports.htm.

Davidoff: “Medicaid's eligibility requirements provides an additional reason why home equity would crowd out insurance demand. Whereas non-housing wealth must be quite low to qualify, housing wealth is virtually exempt from Medicaid means tests.” (p. 10)

LTC Comment: Bingo. That’s the essence of the matter.

Davidoff: “When home equity is liquid . . . with a reverse mortgage . . . the homeowner always demands insurance for more than 50% of expected costs conditional on illness.” (p. 14)

LTC Comment: Fascinating, this is proof of a direct connection we’ve speculated about in these LTC Bullets many times over the years. If home equity were at risk, if Medicaid did not exempt home equity from asset eligibility limits, people who would otherwise rely on Medicaid would need to use reverse mortgages to pay for long-term care. But having to use reverse mortgages to fund long-term care would likely increase demand for private LTC insurance. According to Professor Davidoff, that connection is not just conjecture. It is a fact.

Davidoff: “By contrast, . . . when housing wealth is large and illiquid, insurance demand falls well below 50% to as low as 4%. Because home equity is proportional to housing consumption, the difference between insurance demand with and without a reverse mortgage grows with the value of the home.” (p. 10)

LTC Comment: That’s also a dramatic finding. The damage done by Medicaid’s home equity exemption by crowding out private LTC insurance is magnified the higher and more illiquid housing wealth is. By exempting up to $840,000 of home equity, Medicaid tends to protect all but a small percentage of the elderly’s home equity, keep it illiquid longer, and hence reduce LTCI demand disproportionately.

Davidoff: “[T]he value of the right to take on both LTCI and a reverse mortgage is almost always greater than the sum of the values of taking on the products separately. . . . The complementarity grows with risk aversion and the value of the home.” (p. 14)

LTC Comment: Here’s evidence for another point we’ve made repeatedly, the complementarity of reverse mortgages and long-term care insurance. If people knew home equity were at risk and if it truly were at risk and if many people were actually having to spend down home equity before becoming eligible for Medicaid, then more people coming into their pre-retirement years would take the risk and cost of long-term care seriously and plan, save, invest and insure against that risk and cost. They would also avoid or substantially delay Medicaid dependency.

Davidoff: “Expanding demand for LTCI may require simultaneously expanding demand for home equity extraction among the elderly . . . so bundling LTCI and reverse mortgages may make sense on both demand and supply grounds. The supply side argument is that those who are at highest risk for large medical expenditures are unlikely to live long enough for the value of the home to fall below accumulated principal and interest on a reverse mortgage. If pricing is more favorable in a bundled product than a stand-alone product, then the complementarity . . . would be even stronger.” (p. 16)

LTC Comment: There you have it. The secret to increasing demand for long-term care insurance, and of reducing dependency on and the cost of Medicaid, is “expanding demand for home equity extraction among the elderly,” i.e. reducing or eliminating the Medicaid home equity exemption. So, then, why follow with this non sequitur:

Davidoff: “Eliminating Medicaid coverage of long-term care alone may not dramatically expand LTCI demand. . . . Eliminating Medicaid's favorable treatment of home equity might spur LTCI demand by making home equity a less favored asset and hence reverse mortgages more attractive.” (p. 16)

LTC Comment: That’s far too understated. Eliminating Medicaid’s favorable treatment of home equity would compel house-rich people to consume their home equity before becoming eligible for public welfare. They’d have little choice but to rely on reverse mortgages in order to remain in their homes and pay privately for in-home LTC services. To avoid that eventuality, others in time would plan ahead by purchasing LTC insurance. The connection is direct and unavoidable.

Davidoff: “A more complete welfare analysis would require an understanding of the role of Medicaid in savings and asset allocation (see, e.g. Coe (2007)).” (p. 16)

LTC Comment: Agreed. The main reason most economists and policy analysts miss the full impact of Medicaid’s crowding out LTC insurance is that they believe Medicaid requires impoverishment, but it does not. People qualify based on income as long as their income is below the cost of a nursing home, at least several thousands of dollars per month. They qualify while possessing almost unlimited assets as long as those assets are held in exempt form. Over and above those generous limits, Medicaid planners make excess assets disappear by means of simple techniques like the purchase of exempt assets and/or sophisticated legal mechanisms like special trusts, annuities and reverse half-a-loaf strategies. The paper Davidoff cites by Coe includes this:

I find that single elderly households that anticipate future nursing home needs respond to these incentives by lowering their overall net worth. This effect is prevalent through the bottom 50 percent of the distribution. I estimate between a 40% and 120% crowd-out at the median. I find that most of this crowd-out is coming through lowering housing wealth.

Married households face different incentives than single households through higher asset tests and more assets protected from the Medicaid tax. Thus I find different effects for married households; they do not lower total net worth, but do shift assets from financial (non-protected) assets to housing (protected) assets.^{^[3]}

How much more evidence should anyone need to see that the main reason few people plan for long-term care by means of savings or insurance is that Medicaid is there, and has been for over 50 years, as a cost-free alternative, whether aging consumers realize it consciously or not?

Closing LTC Comment: Thomas Davidoff’s paper is correct and convincing with regard to home equity’s tendency to deflate demand for long-term care insurance. But I think that effect is less that home equity substitutes for insurance in consumers’ minds, but rather that Medicaid’s home equity exemption removes liability for long-term care costs from their concern. Medicaid desensitizes people to long-term care risk and cost, leaving them unprepared for the insurable event and likely to accept free or subsidized care, even of lower quality, when care and its high cost become unavoidable.

Many questions remain if my supposition is correct. Most people don’t know who pays for long-term care, so how could the availability of Medicaid, about which they’re oblivious, prevent them from planning for LTC? What about Medicaid estate recovery; doesn’t that mandatory program recapture exempt home equity from recipients’ estates? Wouldn’t eliminating or reducing Medicaid’s home equity exemption hurt poor people whom the program is supposed to serve?

All these questions have answers consonant with the main argument. I’ve offered my answers elsewhere. I hope scholars of Professor Davidoff’s caliber will reconsider the role of home equity in long-term care financing from the perspective of Medicaid’s elastic financial eligibility criteria, which are far more generous than most analysts have recognized heretofore.

[1] De Nardi M, French E, Jones JB. Medicaid insurance in old age. Am Econ Rev. 2016;106(11):3480-520.

[2] “Medicaid Long-Term Care: Information Obtained by States about Applicants' Assets Varies and May Be Insufficient,” GAO-12-749: Published: Jul 26, 2012. Publicly Released: Aug 27, 2012.

[3] Norma B. Coe, “Financing Nursing Home Care: New Evidence from Spend Down Behavior,” Tilburg University, 2007, p. 33; LINK.

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Updated, Tuesday, June 27, 2017, 9:50 AM (Pacific)

Seattle—

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LTC E-ALERT #17-023: LTC NEWS AND COMMENT

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:

Providers incited over Medicaid provisions in Senate health bill
Census: U.S. is aging, growing more racially diverse
Places in Need: The Changing Geography of Poverty
Medicaid’s Role in Nursing Home Care
Interventions can help reverse physical frailty, study finds
You, On Medicaid
Judge Sides with 130,000 Long-Term Care Policyholders in Class Action Against CalPERS, Permits Case to Proceed to Trial
32% of Baby Boomers Have No Emergency Savings
Announcing the 2017 Caregiver Friendly Award Winners
New Study: Immigrants are the Future of Long-Term Care
How to Use IRA Savings to Buy Long-Term Care Insurance
MarketWatch: Pick a Reverse Mortgage Instead of Care Insurance
5 Top States for Long-Term Care Insurance Use
A new affordable housing option?

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Updated, Friday, June 23, 2017, 10:16 AM (Pacific)

Seattle—

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LTC BULLET: IS IT REALLY HOPELESS TO REDUCE MEDICAID LTC COSTS?

LTC Comment: Kaiser Family Foundation researchers despair of reducing Medicaid LTC expenditures, but their “literature review” is incomplete, misleading and risky.

LTC BULLET: IS IT REALLY HOPELESS TO REDUCE MEDICAID LTC COSTS?

LTC Comment: The news is full of scary stories about Republicans’ plans to curtail Medicaid spending. Are these reports valid or is the risk of letting the Medicaid fiscal monster continue to grow even more dangerous?

That’s a good question. The best way to answer it is to examine the relevant empirical research bearing on the subject. To do so would entail reviewing the evidence on both sides of the question. First, you’d need to ascertain whether current Medicaid spending growth is sustainable. If not, then you’d review the available approaches to control spending for their potential success.

Researchers representing the Kaiser Family Foundation (KFF) skipped the first step and went directly to debunking virtually all possible approaches to reduce Medicaid expenditure growth. We’ll take them to task today regarding their findings that bear on long-term care financing.

Following are quotes from KFF’s newly published “Strategies to Reduce Medicaid Spending: Findings From A Literature Review” authored by Joshua M. Wiener, Melissa Romaire, Nga (Trini) Thach, Aubrey Collins, Konny Kim, Huiling Pan, Giuseppina Chiri, Anna Sommers, and Susan Haber of RTI International and MaryBeth Musumeci and Julia Paradise of the Kaiser Family Foundation. Our comments follow each quote.

KFF Strategies: “The Congressional Budget Office (CBO) estimates that the AHCA’s Medicaid financing changes, along with its repeal of enhanced federal matching funds for the Affordable Care Act’s Medicaid expansion, would reduce federal Medicaid spending by $834 billion from 2017 to 2026, resulting in a 24% reduction in federal Medicaid funds in 2026. States are unlikely to be able to replace a loss of federal funds of that magnitude by increasing taxes or reducing spending in other areas, such as education.” (p. 1)

LTC Comment: But that’s exactly what states have been forced to do to prop up explosive Medicaid expenditure growth under the current system. To support Medicaid, they increase taxes which impairs their economies. Medicaid crowds out other state spending priorities, including education, more each year. It is disingenuous to discredit efforts to control Medicaid spending without first asking whether, and honestly acknowledging that, its current cost growth is unsustainable.

KFF Strategies: “This issue brief considers the feasibility of realizing substantial Medicaid cost savings through strategies aimed at improving delivery system and administrative efficiency. We review the literature about the potential for Medicaid cost savings from . . . four strategies related to long-term services and supports: (5) tightening financial eligibility rules for long-term care services, (6) promoting private long-term care insurance, (7) expanding home and community-based services (HCBS), and (8) increasing use of managed long-term services and supports. We conclude that, while there may be other reasons to pursue these policies, such as improved health outcomes or increased enrollee satisfaction, the literature does not provide strong evidence for achieving large Medicaid savings through adoption of these policies.” (p. 1)

LTC Comment: OK, let’s review their discouraging findings and see if they hold up under scrutiny.

KFF Strategies: “Empirical evidence indicates that any program savings from state strategies to tighten financial eligibility rules for individuals seeking Medicaid long-term care services would be small and offset to some extent by additional administrative expenses. These strategies include curtailing asset transfers, increasing estate recovery efforts, and including retirement accounts as countable assets.” (p. 3)

LTC Comment: Well, we certainly think savings from those strategies would be substantial. See any of our reports here for the evidence. So, why do they think otherwise?

KFF Strategies: “To capture additional private resources to offset Medicaid spending, some observers have proposed tightening transfer of asset rules and more aggressively enforcing these rules and estate recovery.” (p. 13)

LTC Comment: Yes, and we’re among those observers as these authors acknowledge by citing two of our papers on the subject in footnotes: #121 Moses S. Medicaid Planning for Long-Term Care. Briefing paper #3. 2012. http://www.centerltc.com/BriefingPapers/Overview.htm and #122 Moses S. Medicaid Long-Term Care Eligibility. Briefing Paper #2. 2012. http://www.centerltc.com/BriefingPapers/Overview.htm.

KFF Strategies: “Most empirical research on transfer of assets has found that relatively little transfer takes place or that the amount transferred is small.” (p. 14)

LTC Comment: Most is not all. Transferring assets may have increased Medicaid spending by as much as $1.5 billion in 2014 alone according to one study. But focusing only on asset transfers ignores the more widely practiced techniques of Medicaid planning. Indeed, asset transfers are only the tip of the Medicaid planning iceberg. These researchers evade this far bigger problem by ignoring the expansive legal literature on the methods and extent of artificial self-impoverishment to qualify for Medicaid LTC benefits. We explained how analysts who prefer government-based LTC financing debunk private-sector solutions by equivocating on key concepts like “spend down,” “asset transfers” and “out-of-pocket costs” in “LTC Bullet: LTC at a Crossroads,” Friday, June 3, 2016.

KFF Strategies: “Using the Health and Retirement Study, Johnson found that the 2012 median financial wealth for people age 65 and over with two or more activities of daily living (ADL) impairments was $8,300, compared to $104,300 for those who did not have limitations.” (p. 14)

LTC Comment: Focusing on people at the median of wealth and below is another way these researchers minimize the potential of controlling Medicaid financial eligibility. Of course most people who end up on Medicaid are poor. The more important questions are (1) why and how people above the median qualify routinely for those benefits and (2) did people spend down their wealth on long-term care or artificially self-impoverish to qualify for Medicaid? We demolished an earlier argument by KFF that only poor people qualify for Medicaid by showing that most Medicare beneficiaries with above median income and assets qualify easily for the program. See “LTC Bullet: Hoist with its Own Petard,” Friday, April 28, 2017.

Furthermore, basing any conclusions on the “Health and Retirement Study” and its auxiliary Asset and Health Dynamics among the Oldest Old (AHEAD) study is highly dubious for many reasons we explained in “LTC Bullet: Behind AHEAD,” Friday, September 2, 2016.

KFF Strategies: “Current efforts to recover Medicaid LTSS expenditures from the estates of deceased beneficiaries have not yielded large amounts of funds.” (p. 14)

LTC Comment: Well, of course they haven’t. Given the incentives in public policy to hide, transfer or convert countable assets as early as possible, it’s a wonder anything remains in recipients’ estates after they die. Remove those disincentives to responsible LTC planning and more people will save, invest or insure for LTC, become private payers, and avoid Medicaid dependency. Even under the current debilitating federal laws and regulations, some states do estate recovery better than others. We examined estate recovery “best practices” based on interviews with experts in eight leading states in “Maximizing NonTax Revenue from MaineCare Estate Recoveries,” May 15, 2013.

KFF Strategies: “Because of the complex interaction between Medicaid rules with state property, probate, homestead and creditor laws, recovery efforts are conducted on a case-by-case basis, a time-consuming and potentially expensive process.” (p. 15)

LTC Comment: Nonsense. States that do estate recovery well bring in $10 to $15 dollars of non-tax revenue for every dollar they spend on the effort. What business wouldn’t spend a dollar more to increase profits by $15? See my 1988 report for the DHHS Inspector General for a full explanation of how Medicaid estate recovery works and what its potential could be absent federal laws and regulations that prevent its efficient use. Medicaid Estate Recoveries: National Program Inspection -- Office of Inspector General (1988).

KFF Strategies: “The average personal retirement value for all households was $15,069, but the median holding was zero for both single and married couples’ households. Thus, including retirement accounts is unlikely to yield significant savings, again because few Medicaid beneficiaries are likely to have high balances in their accounts.” (p. 15)

LTC Comment: This is specious reasoning. Again, of course most Medicaid LTC recipients are poor and have small retirement account balances. But that does not mean we should ignore those who do have large accounts. Nor should we ignore how Medicaid recipients became poor. Did they spend down on care or use the many techniques of Medicaid planning to appear poor?

KFF Strategies: “Retirement accounts are generally excluded from determining Medicaid eligibility because they are the source of income for retirees and must be withdrawn at a regular schedule designed to match projected mortality rates.”

LTC Comment: True, but consider the consequences. Nearly all that income must be used to offset Medicaid’s cost for recipients’ care. Thus instead of consuming their retirement accounts to purchase quality care in the private market in the most appropriate venue, these people end up in nursing homes on public welfare. Furthermore, once they qualify for Medicaid, care providers receive the welfare program’s dismally low reimbursement rates, which drag down quality for everyone, whether they rely on Medicaid or pay privately.

KFF Strategies: “The private LTC insurance market is in sharp decline, and the future role of the product as a source of financing for LTSS for the general population is in doubt.” (p. 16)

LTC Comment: And whose fault is that? Medicaid pays for long-term care after the insurable event occurs thus desensitizing the public to LTC risk and cost and crowding out demand for private LTC insurance. To add insult to injury, the Federal Reserve forced interest rates to near zero obviating the LTCI insurance market’s profitability. The real problem is perverse incentives in public policy, not any shortcoming with the long-term care insurance product or carriers. Remove those perverse incentives: let the market determine interest rates, target scarce Medicaid benefits to the needy, put home equity at risk for long-term care, and before long Medicaid LTC expenditures will plummet, the reverse mortgage and long-term care insurance markets will thrive, and everyone will have access to better long-term care.

KFF Strategies: “Although proponents of HCBS [home and community-based services] believe savings can be achieved by substituting high-cost institutional services with lower cost HCBS, the research literature is mixed.” (p. 18)

LTC Comment: “Mixed” is a very generous description of that research, most of which clearly indicates that HCBS delay, but usually do not replace institutional care and the two combined, HCBS and nursing home care, end up costing more overall. What these researchers ignore is the reason we have a nursing home bias in the system in the first place. Medicaid made nursing homes virtually free in 1965 and the rest is simply the logical result of such a policy. Without the “Medicaid trap” making people complacent about long-term care until they need it, more would plan early for LTC risk and cost. People who have prepared to pay privately for long-term care don’t go to nursing homes unless they need highly skilled or post-acute care. Rather, they buy personal services provided in their own homes. HCBS do not save Medicaid money; such services cost more overall; the way to expand their availability is to have fewer people reliant on Medicaid which cannot afford HCBS and more people able to purchase services they prefer in the private market.

KFF Strategies: “The expansion of programs that use MCOs [Managed Care Organizations] to integrate LTSS [AKA LTC] and medical care could facilitate improved services and lower costs. However, despite the popularity of these initiatives, there is a marked paucity of evaluations of their effectiveness in lowering unnecessary utilization and expenditures and improving quality of care.” (p. 22)

LTC Comment: That’s a convoluted way to say managed long-term care doesn’t work. But managed care works fine in the Medicare Advantage program, where people voluntarily trade some choice and flexibility for extra cost-free benefits. So what’s wrong with managed long-term care? What’s wrong is superimposing it over the complicated Medicaid LTC mess. Because of Medicaid’s easy financial eligibility rules, too many people rely on it. Because of Medicaid’s institutional bias, too many recipients receive care in expensive nursing homes. But because HCBS cost more overall than institutional care, Medicaid can’t afford to offer mostly HCBS that most people prefer instead of nursing home care most would rather avoid. Once you have that Rube Goldberg system in place, putting an MCO in between the patient and the provider only adds complication and increases costs.

Final LTC Comment: Ironically, these researchers who defend the current Medicaid-based long-term care system against any and all efforts to change it are the real “conservatives.” They cling to the existing system and refuse to hear, see or speak anything that challenges it. The true “progressives” are those who recognize America’s dysfunctional long-term care system is well along the slippery slope to unsustainability and want to fix it.

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Updated, Monday, June 19, 2017, 10:20 AM (Pacific)

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LTC E-ALERT #17-022: LTC NEWS AND COMMENT

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 Turn A Glass Of Wine Into A $173,000 Bump In Your IRA
Long-Term Care Insurers Steering Through Tough Times
New Report Probes Hospital Patients’ Refusal of Home Care Services and the Impact on Readmissions and Outcomes
Caveats for Use of Long Term Care Experience Basic Tables
Americans Besieged by Debt
Alzheimer's begins long before symptoms of memory loss appear, study suggests
AARP: States Lag In Keeping Medicaid Enrollees Out Of Nursing Homes
How Long-Term Care Helped Wreck British PM Theresa May's Election Campaign
You’re Probably Going to Need Medicaid
Tech Revolution Benefits the Aging
Drug crisis is pushing up death rates for almost all groups of Americans
More workers are staying on the job past 65
Your 2017 Guide to Long-Term Care and Long-Term Care Insurance
Will robots be taking care of us in our old age?
Food Stamps Are Making Recipients Fat and Sick

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Updated, Friday, June 16, 2017, 10:35 AM (Pacific)

Seattle—

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LTC BULLET: LTC IS THE NEW FRONT IN MEDICAID WAR

LTC Comment: Most of the debate over ObamaCare repeal has focused on Medicaid for children and young adults (most recipients), but attention is changing to long-term care for the elderly and disabled (highest expenditures). Let’s explore the ramifications.

LTC BULLET: LTC IS THE NEW FRONT IN MEDICAID WAR

LTC Comment: There’s a war on Medicaid raging. Republicans want to cut the program’s expenditures and give states more flexibility and authority to operate the program efficiently and cost-effectively. Democrats claim cuts to the safety net program would devastate low-income people who rely on it for access to basic medical services.

Up to now, most of the battles in this war of words have focused on potential consequences for poor women, children and low-income adults newly added to Medicaid by the Affordable Care Act (ObamaCare). They are important. They represent roughly three-fourths of all Medicaid recipients. But they account for only about one-third of the program’s expenditures.

Lately, the Dem. opponents of Rep. health reform proposals are redirecting their aim. They are beginning to focus on the one-fourth of Medicaid recipients who account for two-thirds of the program’s costs: the elderly and disabled, especially their long-term care needs. The opposition claims that revenue cuts on the order of what the Trump Administration proposes would ravage America’s long-term care service delivery system.

Let’s examine one recent example of that criticism. On Tuesday, June 13, the New York Times ran an op-ed titled “You’re Probably Going to Need Medicaid” by David Grabowski, Jonathan Gruber and Vincent Mor. Following are quotes from that piece followed by our comments:

NYT Op-Ed: “Imagine your mother needs to move into a nursing home. It’s going to cost her almost $100,000 a year. Very few people have private insurance to cover this. Your mother will most likely run out her savings until she qualifies for Medicaid. This is not a rare event.”

LTC Comment: Actually, Medicaid exempts virtually unlimited assets from consideration for long-term care eligibility including a minimum of $552,000 in home equity and, without any dollar limit, one income-producing business including the capital and cash flow, IRAs in payout status, one automobile, term life insurance, prepaid burial plans for the recipient and immediate family, home furnishings, and personal belongings. Excess cash over $2,000 can be converted to an exempt asset by purchasing any of those uncounted assets. There is no empirical evidence of commonplace catastrophic long-term care spend down to qualify for Medicaid as our forthcoming report titled “How to Fix Long-Term Care Financing” substantiates conclusively.

NYT Op-Ed: “Roughly one in three people now turning 65 will require nursing home care at some point during his or her life. Over three-quarters of long-stay nursing home residents will eventually be covered by Medicaid.”

LTC Comment: Well, yes, and why is that? Medicaid made nursing home care virtually free in 1965. Easy access since then to government-financed care after the care is needed desensitized the public to long-term care risk and cost resulting in excessive Medicaid dependency, nursing home bias, too few home care options, and little reason to pay privately from personal funds, home equity or private insurance.

NYT Op-Ed: “Many American voters think Medicaid is only for low-income adults and their children — for people who aren’t ‘like them.’ But Medicaid is not ‘somebody else’s’ insurance. It is insurance for all of our mothers and fathers and, eventually, for ourselves.”

LTC Comment: So true and that, precisely, is the Medicaid trap. People don’t know who pays for long-term care, but they figure someone must. You don’t see Alzheimer’s patients dying in the gutter. So why worry? Then Grandpa has a stroke or Grandma forgets her medicine and suddenly long-term care is unavoidable. Then the question becomes whether to: (1) provide your parents’ care yourself, which is what most people do until the demands become too great, or (2) pay for professional care out of pocket, a practice less and less common having fallen from around 50 percent to about 25 percent of long-term care expenditures, or (3) rely on Medicaid, which as explained above, is relatively easy to get, but has serious access and quality problems. It should be no surprise that most people end up sooner or later in the Medicaid trap.

NYT Op-Ed: “[A]ny legislation that passes the Republican Congress is likely to include the largest cuts to the Medicaid program since its inception. Much focus has rightly been placed on the enormous damage this would do to lower-income families and youth. But what has been largely missing from public discussion is the radical implications that such cuts would have for older and disabled Americans.”

LTC Comment: OK, that’s the pivot from emphasizing most Medicaid recipients (the young) to stressing most Medicaid dollars (the aged and disabled.)

NYT Op-Ed: “Medicaid is our nation’s largest safety net for low-income people, accounting for one-sixth of all health care spending in the United States. But few people seem to know that nearly two-thirds of that spending is focused on older and disabled adults — primarily through spending on long-term care services such as nursing homes.”

LTC Comment: True enough.

NYT Op-Ed: “Indeed, Medicaid pays nearly half of nursing home costs for those who need assistance because of medical conditions like Alzheimer’s or stroke. In some states, overall spending on older and disabled adults amounts to as much as three-quarters of Medicaid spending.”

LTC Comment: True again. Who would deny Medicaid is the 800-pound gorilla of long-term care financing? But does that mean the rapidly growing, financially unsustainable entitlement program should be immune to cost controls and programmatic reform? Evidently so, according to these writers.

NYT Op-Ed: “As a result, there is no way that the program can shrink by 25 percent (as under the A.H.C.A.) or almost 50 percent (as under the Trump budget), without hurting these people. A large body of research, some of it by us, has shown that cuts to nursing home reimbursement can have devastating effects on vulnerable patients.”

LTC Comment: Whoa! Wait a second. Who said anything about reducing nursing home reimbursements? That’s been tried by Medicaid and it has caused serious access and quality problems. What we’re really talking about is giving state Medicaid programs the incentive and authority to manage eligibility and service delivery more efficiently and cost-effectively. How much could Medicaid save by ensuring its LTC benefits go only to the genuinely needy? What if people had to spend their own wealth including home equity before becoming eligible for Medicaid? Genuine spend down, home equity conversion, and private long-term care insurance would pump desperately needed private financing into the service delivery system at market rates relieving LTC providers from the stress of notoriously low Medicaid reimbursement rates. Over time, private financing could replace Medicaid dependency for most Americans thus improving access and care for everyone.

NYT Op-Ed: “Mr. Trump and the Republicans would lower spending on the frailest and most vulnerable people in our health care system. They would like most Americans to believe that these cuts will not affect them, only their ‘undeserving’ neighbors. But that hides the truth that draconian cuts to Medicaid affect all of our families. They are a direct attack on our elderly, our disabled and our dignity.”

LTC Comment: What nonsense! Shame on these scholars for evading the truth of how Medicaid has trapped generations of aging Americans in welfare-financed nursing homes. By ignoring that reality, they condemn future generations to a similar fate at who knows what cost. The real choice could not be more stark. Watch this whole sad house of cards collapse under the impending age wave or fix Medicaid by targeting it to the truly needy and incentivize everyone else to plan early, save, invest or insure for long-term care.

Final LTC Comment: Did you recognize the name of one of this op-ed’s authors, Jonathan Gruber? He’s the same ObamaCare architect notorious for stating “lack of transparency is a huge political advantage. And basically, you know, call it the stupidity of the American voter or whatever, but basically that was really, really critical to getting the thing to pass.” (Source: ObamaCare’s ‘Secret’ History, Wall Street Journal editorial, June 14, 2017) Fool me once, shame on you; fool me again, shame on me.

Suddenly, I’m seeing a spate of articles shifting the focus from young Medicaid recipients (big numbers) to the aged and disabled (big dollars). Here are two examples:

“Daughters Will Suffer From Medicaid Cuts,” New York Times editorial, June 15, 2017

“The Senate’s Stealth Raid on Seniors’ Health Care,” Alex Lawson and Jon Bauman, HuffPost, June 14, 2017

Beware the emotional hyperbole and factual misfeasance in such appeals.

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Updated, Monday, June 12, 2017, 10:35 AM (Pacific)

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LTC E-ALERT #17-021: LTC NEWS AND COMMENT

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:

LTCG Introduces the 14th Edition of Its LTC Underwriting Standards
1 in 3 People in Medicare is Now in Medicare Advantage, With Enrollment Still Concentrated Among a Handful of Insurers
Why Not Try 'Medicare for All'? Glad You Asked
Myth-Busting Medicare for Long Term Care Skilled Services
Why is this modest Medicaid reform so controversial?
The Link Between Falls And Brain Activity
Midlife Crisis? How About a Late-Life Crisis
How Proposed Spending Caps to Medicaid Are Calculated
This is what Alzheimer’s looks like: ‘It looks like me’
Global plan on dementia adopted by WHO
Americans Are Baffled By Long-Term Care Financing, But Want Medicare To Pay For It
U.K. Conservatives Retreat After Backlash Over ‘Dementia Tax’
Municipalities Grapple With Whether Nursing Homes Should Be Taxpayer-Funded
Retirement Savings Gap Seen Reaching $400 Trillion by 2050

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Updated, Friday, June 9, 2017, 10:57 AM (Pacific)

Seattle—

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LTC BULLET: THE MEDICAID MOMENT TO SAVE LTC

LTC Comment: Competition works in the free market; federalism works in the public sector. Put both to work fixing long-term care, after the ***news.***

*** THANKS TO Stephen D. Forman of Center-corporate-member LTC Associates for this tidbit: “Medicaid: If it were a carrier (what I call the Medicaid Insurance Company), its claim payments would dwarf our entire industry by a factor of 10:1 (approx. $120B vs $12B). But how much do you know about it? Take this quiz.” More evidence LTCI is David vs. Medicaid’s Goliath. ***

*** HERE’S THE LATEST from Claude Thau on the Big Sonia “non-Holocaust, Holocaust movie” we highlighted in a recent LTC Bullet:

“Big Sonia” has earned many awards in film festivals. At 8 p.m. Eastern time (7 CT, 6 MT, 5 PT), on Sunday June 11 and Monday June 12, you and your friends can meet "Big Sonia" producers Leah Warshawski (Sonia's grand-daughter) and Todd Soliday. I organized these free sessions so you can ask about "Big Sonia", producing and distributing movies, what they must do to qualify for an Academy Award nomination, how they helped Rwandan independent Hutu and Tutsi filmmakers come together to view each other's films, coping with transgenerational trauma (Leah did a TED talk on this topic recently), etc. This FREE event is part of their crowd-funding effort at https://www.womenyoushouldfund.com/projects/bringing-big-sonia-to-the-big-screen/.

At 8 pm Eastern on either/both June 11 and June 12, please call 712-432-0180 (password: 957803#) to hear the speakers (free if you have “free long distance”) and also click on the date-specific link below.

Click here to register for the “Big Sonia” WebEx Sunday, June 11, at 8 pm Eastern (7 Central, 6 Mountain, 5 Pacific). When you register, you can post the event to social media.
Click here to register for the “Big Sonia” WebEx Monday June 12, at 8 pm Eastern (7 Central, 6 Mountain, 5 Pacific)

Every bit helps, so I’d appreciate your forwarding of this message to people who might be interested. Please encourage them to pass it on.

Payments through the crowd-funding site are NOT tax-deductible. To get a tax deduction, donate to Northwest Film Forum (the non-profit behind this project) either on-line through http://bigsonia.com/ or by contacting Christopher Day, Director of Operations; chris@nwfilmforum.org; 206-329-2629. Their Tax ID is 91-1702331. If you plan to donate $5000 or more, you might call me to discuss the most effective approach.

Your crowd-funding commitment is a pledge, not a payment. If Leah & Todd don’t make their goal, your pledge is voided. That’s why I am so thankful not only for your potential pledge but also for passing this message on to other possibly interested parties.

Thanks and Best wishes!
Claude Thau
Director of Long Term Care Insurance Funding Solutions, Target Insurance Services ***

LTC BULLET: THE MEDICAID MOMENT TO SAVE LTC

LTC Comment: Top down central planning doesn’t work. The Soviet Union, Cuba, and Venezuela proved that conclusively.

Yet, Medicaid is a top down program. Federal Pooh-Bahs tell states how to run the program, allow minimal flexibility, encourage overspending by matching as much as states care to spend, and then micro-manage in ways that prevent efficient operation. I know. I was a Medicaid State Representative for the Health Care Financing Administration in the 1980s. I conceived my job as helping Oregon operate a good program in spite of debilitating federal rules, regulations, and interference.

Just imagine what could happen if state Medicaid programs received federal funding less hamstrung by stultifying red tape. Fifty states would experiment with diverse approaches to service delivery, financing and eligibility. They’d compete to provide the most cost-effective services for recipients and tax payers. Our country’s Founders understood this, which is why they created a federal system in the Constitution leaving most responsibility and power with the people and the states.

As we explained in a recent LTC Bullet: Medicaid Matters Most, May 5, 2017, Medicaid isn’t just a factor in long-term care financing, it is the critical factor affecting everything. Medicaid is responsible for (1) institutional bias, (2) access and quality problems, (3) the shortage of private payers, (4) undeveloped private markets for home care and insurance, (5) inadequate caregiver supply, and so on. Fixing Medicaid is the leverage we need to fix long-term care.

Last Tuesday’s (June 6) Wall Street Journal contained an editorial titled The Senate’s Medicaid Moment. It illustrated how state Medicaid programs can make a big difference when they’re given even a modicum of elbow room to operate creatively. Here are some quotes from that piece followed by our comments.

WSJ: “Senate Republicans are struggling to agree on health reform, and the biggest divide concerns Medicaid. The problem is that too many seem to accept the liberal line that reform inevitably means kicking Americans off government coverage.”

LTC Comment: Just about everything we do and say at the Center for Long-Term Care Reform shows and proves that targeting Medicaid LTC benefits to the genuinely needy will improve care access and quality for everyone by creating stronger incentives for people to plan early, save, invest or insure for long-term care. So, giving states more authority to manage Medicaid LTC eligibility won’t kick people off Medicaid. It will prevent them from becoming dependent on government coverage in the first place.

WSJ: “The modern era of Medicaid reform began in 2007, when Governor Mitch Daniels signed the Healthy Indiana Plan that introduced consumer-directed insurance options, including Health Savings Accounts (HSAs).”

LTC Comment: The new Administrator of CMS, Seema Verma, was responsible for these Medicaid reforms in Indiana and she’s now ideally positioned to help other states experiment with all kinds of eligibility, service delivery and financing reforms . . . as soon as Congress and the President remove the handcuffs on state experimentation and creativity.

WSJ: “Rhode Island Governor Donald Carcieri applied for a Medicaid block grant that gives states a fixed sum of money in return for Washington’s regulatory forbearance. . . . Over the first three years, the Rhode Island waiver saved some $100 million in local funds and overall spending fell about $3 billion below the $12 billion cap. The fixed federal spending limit encouraged the state to innovate, such as reducing hospital admissions for chronic diseases or transitioning the frail elderly to community care from nursing homes.”

LTC Comment: This is the classic example of what can happen when states receive a set amount of federal funding with fewer strings attached. We published reports highlighting the potential of Rhode Island’s unique global waiver to improve Medicaid long-term care: Doing LTC RIght (2010) and The Age Wave, the Ocean State, and Long-Term Care (2009).

WSJ: “Block grants are now even routine in none other than Andrew Cuomo’s New York. After a scandal where federal investigators concluded the state had systematically manipulated Medicaid payment formulas to generate federal payola for more than two decades, the Democratic Governor agreed in 2014 to a waiver that caps ‘global’ spending at the growth rate of long-term health-care inflation (3.6%).”

LTC Comment: For more on the scandal that had this result, see “LTC Bullet: Bipartisan Congressional Blast at New York Medicaid,” February 22, 2013.

WSJ: “This reform honor roll could continue: the 21 states that have moved more than 75% of all beneficiaries to managed care, Colorado’s pediatric ‘medical homes’ program, Texas’s Medicaid waiver to devolve control to localities from the Austin bureaucracy. But liberals and the media ignore this progress as they try to frighten the GOP into doing nothing.”

LTC Comment: I hate to see these issues cast in political, especially ideological, terms. There is an objective reality independent of philosophical opinions. Competition and federalism work. Central planning doesn’t. Let’s try the former for once and see what happens.

WSJ: “[S]ome 600,000 Americans with disabilities, brain injuries and mental illness are now in purgatory on state Medicaid waiting lists, and they compete with new Medicaid’s [i.e., ObamaCare’s] able-bodied adults for scarce resources. Better to prioritize the truly needy while promoting other goals like health outcomes or labor force attachment.” [Emphasis added.]

LTC Comment: Hear, hear! It’s about time someone, besides us, recognized that the current system hurts the truly needy most.

WSJ: “The political reality is that Republicans won’t get a better chance to reform an entitlement if they muff this one. ObamaCare is imploding, with Anthem saying Tuesday it will leave 18 counties in Ohio next year. Senate Republicans need to settle their differences or prepare to get run out of town.”

LTC Comment: One way Republicans could enhance their chances would be to focus more on the long-term care side of Medicaid (where most of the money is) and less on the acute care side (where most of the recipients are.) It is a potentially advantageous fact that spending less for Medicaid LTC, but spending it on those most in need could save billions. See our reports: Save Medicaid LTC $30 Billion Per Year AND Improve the Program (2011) and “Briefing Paper #5: Dual Eligibles and Long-Term Care: How to Save Medicaid LTC $30 Billion Per Year and Pay for the ‘Doc Fix’" www.centerltc.com/BriefingPapers/5.htm (2012).

Bottom line, Medicaid long-term care cannot go on indefinitely as it is. The program is unsustainable and will hit a fiscal wall around 2031 when boomers start turning 85 and Social Security/Medicare have to cut back 25 percent or more. Scary as change may be, block grants are a cake walk compared to the inevitable future without them.

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Updated, Friday, June 2, 2017, 10:50 AM (Pacific)

Seattle—

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LTC Bullet: Long-Term Care News and Analysis

Many Center for Long-Term Care Reform Premium members are familiar with our LTC Clipping Service, and from what we hear, get great value from this benefit of Premium membership.

INSURANCE (Long-Term Care Insurance, Critical Illness Insurance, Hybrid and Miscellaneous [including alternative financing solutions])
LONG-TERM CARE (General, Cost, Assisted Living, Nursing Homes, Home Care, Caregiving, Veterans Affairs and Government Solutions)
MEDICAID (General and Medicaid Planning and Crowd-Out Effect)
MEDICARE (and Medi-Gap and Medicare Advantage)
SOCIAL SECURITY
ALZHEIMER'S DISEASE
POLITICS, LEGISLATION AND PUBLIC POLICY
ECONOMICS, DEMOGRAPHICS AND DATA
RETIREMENT PLANNING
HEALTH AND HEALTHCARE
OTHER

Steve, you and Damon have been a valuable resource for me regarding all aspects of Long Term Care planning for my clients. I believe there is not an article on the subject that you have missed. Keep up the good work. -- Eric Rubin, CLTC, Cedar Brook Financial Partners

I love the clippings . . . very informative and I'm impressed with the amount of info you are consistently filtering through. I really enjoy the LTC comments, as they boil it down perfectly for me! -- Jared Turner, Executive Chairman, Amada Franchise, Inc.

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Contact Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month.

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6/1/2017, “This is what Alzheimer’s looks like: ‘It looks like me’” by Judy Woodruff, PBS NewsHour

Quote: “Now to another in our Brief But Spectacular series, where we ask people to describe their passions. Five-and-a-half million Americans are living with Alzheimer’s disease, and another 15 million serve as their unpaid caregivers. Tonight, two individuals diagnosed with Alzheimer’s, Chris Hannafan and Pam Montana, share their experiences.”

LTC Comment: “Brief but spectacular,” indeed. Watch the short video or read the transcript.

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5/28/2017, “Municipalities Grapple With Whether Nursing Homes Should Be Taxpayer-Funded,” by Jennifer Levitz, Wall Street Journal

Quote: “In these places, ‘residents want a nursing-home option for themselves in the future, and they're willing to pay taxes to support that,’ he said. But government-owned and -run facilities often have deficits and have outdated institutional styles that don't attract the wealthier private-pay customers that offset Medicaid patients, said Jeff Binder, managing director of Senior Living Investment Brokerage Inc. Medicaid payments also face uncertainty, with the new White House budget proposing heavy cuts to the federal-state health program for the poor.”

LTC Comment: Medicaid made nursing home care free in 1965 causing institutional bias and exploding budgets, the consequences of which are coming to bear now, but especially in 14 years when boomers start turning 85.

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5/26/2017, “Retirement Savings Gap Seen Reaching $400 Trillion by 2050,” ThinkAdvisor

Quote: “Longer life spans and disappointing investment returns will help create a $400 trillion retirement-savings shortfall in about three decades, a figure more than five times the size of the global economy, according to a World Economic Forum report. That includes a $224 trillion gap among six large pension-savings systems: the United States, the United Kingdom, Japan, Netherlands, Canada and Australia, according to the report issued Friday. China and India account for the rest.”

LTC Comment: Need some help imagining how much $400 trillion is? Check this out and multiply by 400: http://www.pagetutor.com/trillion/index.html.

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5/25/2017, “Home gaining on LTC as final residence for those with Alzheimer's,” by Lois A. Bowers, McKnight's Senior Living

Quote: “Of those who died with Alzheimer's disease in 2014, the most recent year studied:

54.1% died in a nursing home or other long-term care facility, compared with 67.5% in 1999
24.9% died at home, compared with 13.9% in 1999
6.6% died in a hospital, compared with 14.7% in 1999
6.1% died in a hospice

These realities, wrote the authors of an article in the CDC's Morbidity and Mortality Weekly Report, have implications for the government and the healthcare system, because some states and counties operate publicly funded long-term care facilities and because payments for more than two-thirds of the anticipated $259 billion in healthcare and long-term care costs for people with Alzheimer's and other dementias in the United States in 2017 are expected to come from public sources such as Medicare and Medicaid.”

LTC Comment: The tragedy that America’s WW-II “greatest generation” ended up dying in welfare-financed nursing homes was entirely an artifact of Medicaid’s interference in the LTC market. Without the welfare program’s institutional bias and effective crowd out of the home care market and private financing alternatives like home equity conversion and LTC insurance, nursing homes would have served a critical, but limited purpose providing sub-acute care and most custodial care would have been delivered in people’s homes.

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5/25/2017, “Survey: 75% of 40+ adults do not know how much assisted living costs,” by Lois A. Bowers, McKnight's Senior Living

Quote: “Only 25% of adults queried by investigators at the Associated Press-NORC Center for Public Affairs Research correctly estimated costs, which the center said average $3,000 to $4,000 per month, whereas 44% underestimated them and 30% overestimated them. Underestimating has grown since the first surveys were conducted in 2013 and 2014, when it was 31%, according to center representatives.”

LTC Comment: Ignorance is bliss, until . . .

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5/25/2017, “Older Americans Want Medicare to Pay for Long-Term Care,” by Emily Swanson, U.S. News & World Report

Quote: “More than half of older Americans — 56 percent — think the federal government should devote a great deal or a lot of effort to helping people with the costs of long-term care, and another 30 percent think it should make a moderate effort to do so. . . . Most also favor tax policies to encourage long-term care planning, including tax breaks to encourage saving for long-term care and the ability to use nontaxable accounts like 401(k)s and IRAs to pay for long-term care insurance premiums. . . . Fifty-seven percent plan to rely on Medicare quite a bit or completely for their own ongoing living assistance if and when they need it, even though Medicare does not cover most nursing care or home health aides. Just 25 percent plan to rely on Medicaid. Medicaid is much more likely to pay for long-term care, but is only available to lower income and disabled individuals and families.”

LTC Comment: What’s more predictable than “People want something for nothing” and “Politicians thrive by appearing to give it to them?”

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5/24/2017, “How Medicaid Reforms Could Harm Even Middle-Class and Wealthy Americans,” by Christy Bieber, Motley Fool

Quote: “When seniors need care they cannot afford, Medicaid picks up the tab, provided the senior has a low income -- with maximum income varying by state and program -- or functional limitations that necessitate care, such as the inability to bathe, get dressed, or use the bathroom without assistance. Seniors must also have countable financial assets below an allowable amount, which is usually $2,000 per person and $3,000 per family; however, not all assets are countable, and spouses who remain in the community are allowed to maintain some assets.”

LTC Comment: If you have to be that poor to qualify, how could cutting Medicaid hurt the middle class and wealthy? Therein lies the fallacy in this argument. You don’t have to be that poor to qualify for Medicaid LTC benefits. Income rarely counts because medical and LTC expenses are deducted before counting it. Assets are easy to convert to exempt status. So, yes, Trumpcare cuts will impact the wealthy and middle class, but why should they be getting welfare for LTC instead of private insurance?

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5/24/2017, “CDC: Those 85+ are six times as likely to need ADL help than those aged 65 to 74,” by Lois A. Bowers, McKnight's Senior Living

Quote: “U.S. adults aged 85 or more years are approximately three times as likely to need assistance with activities of daily living as are adults aged 75 to 84 and are six times as likely to require help as those aged 65 to 74, according to newly released data from the Centers for Disease Control and Prevention.”

LTC Comment: Key takeaway: boomers start turning 85 in 2031, about the time Social Security and Medicare run out of IOUs in their “trust funds.” Our window of opportunity to prepare for the age wave is rapidly closing.

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5/22/2017, “U.K. Conservatives Retreat After Backlash Over ‘Dementia Tax’,” by Stephen Castle, New York Times

Quote: “Having called an early election in an attempt to expand her party's majority in Parliament, Prime Minister Theresa May is pitching her ‘strong and stable leadership’ at a time when Britain confronts the formidable challenge of leaving the European Union. But on Monday, Mrs. May found that carefully crafted image at risk, as she agreed to revisit a controversial proposal to put a hard cap on the assets that residents who receive long-term care at home may own. The proposal, widely derided as a ‘dementia tax,’ raised such an uproar that Mrs. May was forced to beat a hasty retreat.”

LTC Comment: Thanks to Center member and LTCI advocate Ross Schriftman for tipping us to this article. We analyzed the British proposal earlier: Try British LTC Plan Here, May 26, 2017. So paying for your own long-term care is a “dementia tax” now?

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5/22/2017, “Trump wants to cut $800 billion from Medicaid. Where does all the program’s money go?,” by Megan Thielking, STAT

Quote: “President Trump is expected to release his new budget proposal this week, which is reported to include an $800 billion cut to the Medicaid budget over the next 10 years. That proposal assumes that the American Health Care Act — passed by the House earlier this month — will become law. That’s far from a sure thing, given big questions about the Senate’s plans for health care reform. But if Medicaid is going to be slashed, it’s worth taking a look at exactly how the program spends its money now. After all, Medicaid accounts for $1 out of every $6 spent on health care in the US. But there are major differences in what that spending looks like on a state-by-state level. And certain services cost Medicaid far more than others.”

LTC Comment: Expect a lot of articles like this one this week, but read them dubiously. This one, for example, compares Medicaid managed care (46% of costs) with acute care (26%) and long-term care (20%), but managed care provides both acute and long-term care. Apples and oranges. The right way to break down costs is between the aged, blind and disabled who are ¼ of the recipients but account for 2/3 of the costs, largely for long-term care, but also for acute care not provided by Medicare and for dual eligibles’ Medicare premiums, co-insurance and deductibles. Divert people from becoming expensive dual eligibles to reduce Medicaid expenditures hugely without hurting anyone. See How Much Could Medicaid Save?, May 12, 2017. We estimated the savings to Medicaid could be $16.7 billion per year, more than double the $800 billion proposed in the first Trump budget.

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5/19/2017, “Planning to Age in Place? Find a Contractor Now,” by Paula Span, New York Times

Quote: “Older people have the highest rate of homeownership in the country — about 80 percent, according to a 2016 report by the Joint Center for Housing Studies at Harvard. The great majority live in single-family homes, most of them poorly suited for the disabilities common in later life.”

LTC Comment: How ironic that seniors have so much home equity that could help them age in place, but government policy, in the form of huge exemptions for home equity, divert them to nursing homes under-funded by Medicaid.

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5/17/2017, “Congress May Open The Door To Some Medicare Long-Term Care,” by Howard Gleckman, Forbes

Quote: “Congress is taking a small, but important, step towards expanding Medicare to include some long-term supports and services. A bipartisan (yes, bipartisan) measure before the Senate Finance Committee would give some Medicare providers additional flexibility in the way they care for people with chronic conditions, who are among the program’s highest need and highest cost beneficiaries.”

LTC Comment: Ironically, the long-term care problem is not too little government money but too much. Medicaid made nursing home care free, impaired the private home care market, crowded out private financing, and paid providers less than cost hurting care access and quality. Adding more Medicare funding will further desensitize the public to LTC risk and cost, hasten the program’s insolvency, and exacerbate the coming economic implosion when the current credit bubble bursts.

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5/15/2017, “5 New Facts About Retirees’ Real Health Care Bills,” by Allison Bell, ThinkAdvisor

Quote: “The authors of the new paper don't break catastrophic risk down by income level, but they note that Medicare enrollees in the top 5% in terms of out-of-pocket spending probably spent an average of $19,009 out of pocket in 2016. . . . In 2016, high-income Medicare enrollees spent an average of $564 on dental care, $820 on audiologists and other providers not paid by Medicare, and $913 on prescription drug co-payments and coinsurance bills. . . . The new out-of-pocket spending analysis shows that, for the 2016 Medicare enrollees in the top 5% in terms of out-of-pocketing spending, long-term care spending of all kinds accounted for more than $13,400 of the $19,009 in average out-of-pocket spending.”

LTC Comment: It is unusual, but welcome, to see analysts focus on upper-income Medicare beneficiaries instead of claiming all older people are poor and desperately in need of more government largesse. Next they should analyze how easily upper-income Medicare beneficiaries qualify for Medicaid LTC benefits as we did in “LTC Bullet: Hoist with its Own Petard,” Friday, April 28, 2017.

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Updated, Tuesday, May 30, 2017, 10:55 AM (Pacific)

Seattle—

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LTC E-ALERT #17-020: LTC NEWS AND COMMENT

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:

Survey: 75% of 40+ adults do not know how much assisted living costs
Home gaining on LTC as final residence for those with Alzheimer's
Older Americans Want Medicare to Pay for Long-Term Care
How Medicaid Reforms Could Harm Even Middle-Class and Wealthy Americans
Medicaid is costly for taxpayers, downright disastrous for patients -- Trump's budget would change that
CDC: Those 85+ are six times as likely to need ADL help than those aged 65 to 74
Argentum Monitoring Impact of Proposed Budget on Senior Living
Trump wants to cut $800 billion from Medicaid. Where does all the program’s money go?
Assisted living hospice care, HCBS, Medicaid make OIG list
Baby Boomers Look to Senior Concierge Services to Raise Income
More older people in America are embracing a new relationship style called 'living apart together'

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Updated, Friday, May 26, 2017, 10:02 AM (Pacific)

Seattle—

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LTC BULLET: TRY BRITISH LTC PLAN HERE

LTC Comment: Use home equity to fund better home care and relieve the entitlement cost burden on the young, say Tories. Nix, says Labour. All lose, after the ***news.***

*** SOMETHING SPECIAL TO SHARE: Thanks to LTCI leader Claude Thau for bringing the “Big Sonia” film and fund-raising campaign to our attention. Claude says:

“Having lost all my grandparents during the holocaust before I was born, I experience cognitive dissonance as each generation of my descendants identifies less-and-less with the holocaust. I feel a loss in that regard although it is wonderful that the holocaust has not recurred for them. But genocides continue (consider ISIS attacks on Yazidis; Serbia; Rwanda) and I think we generally don’t respond strongly enough. Genocide goes beyond war and even beyond terrorism. Leah Warshawski and Todd Soliday effectively deliver a very important message about persistence and resilience and wrap it subtly with other issues such as aging of people and malls, caregiving, prisons, and immigration.”

The crowd-funding website attempting to bring the film to the big screen describes it as follows:

“BIG SONIA is a feature documentary about 91-year old diva, ‘national treasure,’ business owner and Holocaust Survivor - Sonia Warshawski. The film interweaves themes of resilience, aging with purpose, inter-generational trauma, the death of modern American retail, and survival against all odds to ultimately ask: ‘Will you let your past define your present?’ BIG SONIA is relatable and universal - it's a ‘non-Holocaust, Holocaust movie’ - and the film's lessons are important and relevant NOW, more than ever.”

I (Steve Moses) watched the film’s “trailer,” made a personal contribution here and thought readers would find the film and the fund-raising campaign of interest. ***

*** ON INNOVATION: "[T]here is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them." Machiavelli, The Prince, Chapter 6. ***

LTC BULLET: TRY BRITISH LTC PLAN HERE

LTC Comment: Here’s the gist of “The British Entitlement Backtrack,” a recent Wall Street Journal editorial, about a good idea the Brits couldn’t quite pull off. Our comments follow quotes from the column.

WSJ Editorial: “[British] Retirees currently receiving medical and other personal care in their own homes have the bulk of their costs covered by taxpayers, while those who need to move into nursing homes must sell their homes and use the bulk of the proceeds [all but 23,500 British pounds or $30,550] to fund their care.”

LTC Comment: Pretty unfair, huh? We solve that particular problem by exempting up to $840,000 of home equity from Medicaid eligibility consideration for both home care and nursing home care. Sweet deal for people who don’t want to bother planning for LTC risks and costs, but awfully unfair for the young who will have to pick up the tab for their elders’ taxpayer-subsidized windfall.

WSJ Editorial: “The Tory plan would have factored in the value of a care recipient’s home when means-testing in-home care. This in turn would fix two big injustices. First, it would have ended the double standard under which those who require nursing-home care are expected to use the value of their homes to pay for it, while those who require at-home care get to pass their homes to heirs as taxpayers fund their care. Second, the reform would have meant that younger workers would no longer be forced to subsidize in-home care for the elderly who can afford it.”

LTC Comment: Our own Medicaid-based LTC financing system fails on both counts, trapping most people on Medicaid for long-term care, wherever provided, and sending the bill to future generations.

WSJ Editorial: “The Tory reform would have allowed people to remain in their homes during their lifetimes, recouping care costs only after death. Further, it exempted the first £100,000 ($130,400) of an estate, four times the current cut-off that applies to those entering nursing homes.”

LTC Comment: Recouping exempted home equity from Medicaid recipients’ estates was the idea behind making estate recoveries mandatory in the Omnibus Budget Reconciliation Act of 1993. See the HHS Inspector General report I wrote that was the basis for that reform: Medicaid Estate Recoveries: National Program Inspection -- Office of Inspector General (1988). Unfortunately, the states didn’t implement the new requirement effectively; CMS didn’t enforce it aggressively; the media didn’t publicize it; and consumers remained oblivious. So estate recoveries didn’t have the desired effect of incentivizing more people to plan early and responsibly for LTC risks and costs.

No problem today, however. We now have reverse mortgages that enable people to remain in their homes, but generate income to pay for any needed long-term services and supports. There’s no need any more for Medicaid to recapture home equity from estates. The reverse mortgage issuers take that burden off the government’s shoulders. All we need to do is eliminate or radically reduce Medicaid’s home equity exemption and the USA can enjoy all the benefits the British passed up by dropping their home equity reform.

WSJ Editorial: “This gave the Tories an opening to combine a free-market disdain for subsidies for the wealthy with the left-wing mantra that ‘the rich’ should pay their fair share.”

LTC Comment: There in a nutshell is the essence of the issue and the argument we need to make for curtailing Medicaid’s home equity exemption. Both fiscal conservatives and economic liberals who condone huge home equity exemptions are hypocrites based on their own avowed principles.

WSJ Editorial: “It’s hard to sell a major entitlement reform when the rest of your platform tells voters you think they’re entitled to a litany of government-mandated handouts. . . . The more you adopt the entitlement mentality of the left, the less your ability to advance the major reforms that Western economies—and their taxpayers—need.”

LTC Comment: Sound familiar? For all its efforts to rein in Medicaid over-spending, the Trump budget proposal’s neglect of Social Security and Medicare, even bigger entitlement sieves, parallels the British mistake recounted in this column.

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Updated, Monday, May 22, 2017, 9:55 AM (Pacific)

Seattle—

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LTC E-ALERT #17-019: LTC NEWS AND COMMENT

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:

Seniors' use of technology is growing, survey finds
5 New Facts About Retirees’ Real Health Care Bills
Planning to Age in Place? Find a Contractor Now
Home Health vs. Seniors Housing
Congress May Open The Door To Some Medicare Long-Term Care
Thinking Gen X: An Overdue Look at an Overlooked Generation
Assisted living is 16% of elder housing market: report
Rich Retirees Are Hoarding Cash Out of Fear
Nebraska’s new Medicaid managed care system blamed for problems with billing and getting approval for care
Medicaid can collect SNF room-and-board costs, state high court rules
New Gene Tests Pose a Threat to Insurers
Annuities may create too much income

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Updated, Friday, May 19, 2017, 9:48 AM (Pacific)

Seattle—

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LTC BULLET: THE BROKEN RHYTHM OF LONG-TERM CARE REFORM

LTC Comment: Why did Medicaid long-term care eligibility reforms quickly follow economic recessions until the year 2000, but no longer? The answer follows.

LTC BULLET: THE BROKEN RHYTHM OF LONG-TERM CARE REFORM

LTC Comment: Why have we seen no progress for eight years to protect Medicaid as a long-term care safety net for the poor? Why are Medicaid LTC benefits more readily available than ever to middle class and affluent people who failed to plan for long-term care? Why has the previously steady rhythm of long-term care reform been broken? I wrote this article to address those questions.

“The Broken Rhythm of Long-Term Care Reform”
by
Stephen A. Moses

Historically, progress toward making Medicaid a better long-term care safety for the poor tended to occur shortly after major economic downturns when state and federal governments faced serious budgetary constraints. After most recessions since 1965, Congresses and Presidents of widely divergent ideological persuasions backed legislation that closed Medicaid long-term care eligibility loopholes and encouraged early and responsible long-term care planning. But as each recession was followed by a rapid economic recovery and fiscal pressure abated, Medicaid long-term care benefits always reverted to virtually universal availability for all economic classes. That pattern prevailed for the first 35 years of the program, but it ended at the turn of the millennium. It has been eight years since the end of the “Great Recession” in June 2009; the country is mired in a slow, anemic recovery; but we’ve still seen no movement, much less legislation, to target Medicaid’s scarce resources to the needy. Why?

The Rhythm of Long-Term Care Reform

On July 30, 1965, President Lyndon Johnson signed Medicaid into law providing “medical assistance on behalf of . . . aged, blind, or permanently and totally disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services.” The new program’s costs immediately exploded far beyond expectations. The U.S. suffered a recession from December 1969 to November 1970, which sensitized the country to the spiraling guns-and-butter expenditures of the Viet Nam War and Great Society programs. By 1970, a Wisconsin Law Journal article concluded

To evaluate Medicaid at the halfway mark to 1975, i.e., in terms of its ability to provide comprehensive medical care to substantially all needy and medically needy, would show not merely a failure but, perhaps, a disaster.^{^[i]}

The country fell into economic recessions again from November 1973 to March 1975 and from January to July 1980. Finally, Congress acted to curtail spiraling Medicaid LTC expenditures. On December 5, 1980, President Jimmy Carter signed the Omnibus Reconciliation Act, imposing the first ever restriction on asset transfers done in order to qualify for Medicaid. Until then, Medicaid “applicants were expressly permitted to transfer resources that otherwise would have disqualified them from receiving any benefits.”^{^[ii]}

July 1981 to November 1982 brought another recession during which, on September 3, 1982, President Reagan signed the Tax Equity and Financial Responsibility Act authorizing, but not requiring, state Medicaid programs to penalize asset transfers, place liens on real property, and recover benefits from the estates of deceased recipients. Reagan doubled down on April 7, 1986, signing the Consolidated Omnibus Budget Reconciliation Act that restricted the use of Medicaid Qualifying Trusts. He followed through again on July 1, 1988 by signing the Medicare Catastrophic Coverage Act, which made asset transfer penalties mandatory and expanded the transfer of assets look-back period to 30 months.

Unfortunately, these Reagan-era measures were not strongly enforced or publicized. With the economy booming, it was easier for the state and federal governments to pay the still-burgeoning Medicaid bills and avoid the political sensitivity of enforcing restrictions on Medicaid long-term care eligibility. But that changed when the country experienced another recession from July 1990 to March 1991. All of a sudden, state and federal officials were again having trouble making budget ends meet. Congress responded and President Bill Clinton signed the Omnibus Budget Reconciliation Act on August 10, 1993, making estate recovery mandatory, expanding the look back period to three full years, eliminating the cap on asset transfer penalties, and prohibiting “pyramid divestment.” When costs continued to skyrocket, Clinton also doubled down. On August 21, 1996, he signed the Health Insurance Portability and Accountability Act (the “Throw Granny in Jail Law”) making it a crime to transfer assets for less than fair market value for the purpose of qualifying for Medicaid.

But the latter Clinton years brought renewed prosperity as the technology boom intensified. With revenues up and welfare rolls down, why worry about enforcing rules to target Medicaid to the needy? On August 5, 1997, President Clinton signed the Balanced Budget Act 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. Shortly thereafter, this “Throw Granny’s Lawyer in Jail Law” was deemed unconstitutional and thus unenforceable. Back to square one.

The Rhythm of Reform Breaks

This historical pattern of rapid statutory action to control Medicaid planning abuse following each economic recession ended with the start of the new millennium. After the March to November 2001 recession resulting from 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, placing the first cap ever on Medicaid’s home equity exemption, extending the asset transfer look back period to a full five years, limiting the half-a-loaf loophole, amending the annuity rules, and unencumbering the Long-Term Care Partnership Program, was not signed into law by President George W. Bush until February of 2006, nearly five years after the start of the previous recession. Ultimately, economic recovery did come and true to form, enforcement of the DRA ’05 declined.

The next economic boom ended when the housing bubble burst causing the Great Recession of December 2007 to June 2009. Again, economic recovery has come very slowly and meagerly.^{^[iii]} To date, eight years after the end of the last recession, we have seen neither a full economic recovery nor 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, toward proposing yet another government program funded by taxpayers to expand public financing of long-term care for all.

What Broke this Rhythm of Reform?

What might explain both phenomena, i.e., 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 after the internet bubble burst and to almost zero 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 previously inevitable fiscal 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 mushrooming budgets and debt has abated 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 mid-decade 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 nearing $20 trillion and total unfunded entitlement liabilities around $106 trillion, a return to economically realistic market-based interest rates would render the federal government immediately insolvent.^{^[iv]}

Rendezvous with the Age Wave Looms

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 and Medicare programs cash-flow negative. Boomers began taking Required Minimum Distributions (RMDs) from their tax-deferred retirement accounts in 2016, depleting the supply of private investment capital. They will reach the critical age (85 years plus) of rising long-term care needs in 2031, around the time Social Security and Medicare 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 Center 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.”^{^[v]} In summary, conditions are coalescing for a potential economic cataclysm in or before the second third of this century and public officials are almost totally ignoring the risk.

Conclusion

Old-fashioned monetary and fiscal discipline kept Medicaid long-term care spending somewhat in check during the program’s early decades. Spending skyrocketed all along, but when the country fell into recessions, state and federal legislators responded with measures to reduce the overuse of Medicaid. Those measures helped to discourage prosperous people from ignoring long-term care risk and hence ending up on Medicaid by default.

But any semblance of monetary and fiscal discipline ended after the year 2000. Artificially low interest rates invited deficit spending and enabled politicians to keep Medicaid eligibility very generous without breaking their budgets. Easy access to Medicaid long-term care benefits after care was needed anesthetized the public to LTC risk and cost, impaired the private home care market, and crowded out sources of private funding such as home equity conversion and long-term care insurance.

Consequently, the country is on the cusp of aging demographic and economic crises of historic proportions without the resources to continue funding the current system nor the incentives in public policy to inspire more responsible long-term care planning by the public. The solution, and the only hope for a benign outcome, is to end Federal Reserve manipulation of interest rates and stop federal deficit spending, so we can once again target Medicaid’s scarce resources to people genuinely in need.

While we are unlikely to see such policy changes soon, we definitely should redouble our efforts toward those objectives.

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[i] Sydney E. Bernard and Eugene Feingold, “The Impact of Medicaid,” Wisconsin Law Review, Wis. L. Rev. 726 1970.

[ii] Timothy N. Carlucci, “The Asset Transfer Dilemma: Disposal of Resources and Qualification for Medicaid Assistance,” Drake Law Review, 36 Drake L. Rev. 369 1986-1987

[iii] According to the Wall Street Journal, we are experiencing “the weakest pace of any expansion since at least 1949.” Eric Morath and Jeffrey Sparshott, “U.S. GDP Grew a Disappointing 1.2% in Second Quarter,” Wall Street Journal, July 29, 2016; http://www.wsj.com/articles/u-s-economy-grew-at-a-disappointing-1-2-in-2nd-quarter-1469795649.

“Even seven years after the recession ended, the current stretch of economic gains has yielded less growth than much shorter business cycles.” Eric Morath, “Seven Years Later, Recovery Remains the Weakest of the Post-World War II Era,” Wall Street Journal, July 29, 2016; http://blogs.wsj.com/economics/2016/07/29/seven-years-later-recovery-remains-the-weakest-of-the-post-world-war-ii-era/

[iv] The “National Debt Clock” (http://www.usdebtclock.org/) places U.S. national debt at $19.9 trillion and unfunded liabilities at $106.0 trillion (cited May 2, 2017).

[v] Christopher J. Truffer, Christian J. Wolfe, and Kathryn E. Rennie, “Report to Congress: 2016 Actuarial Report on the Financial Outlook for Medicaid,” Office of the Actuary, Centers for Medicare & Medicaid Services, United States Department of Health & Human Services, Sylvia Mathews Burwell, Secretary of Health and Human Services, 2016, p. 3; [LINK]. This identical quote was in the 2013 version of the “Actuarial Report” and was critiqued in S. Moses, “LTC Bullet: Does Medicaid Solvency Matter?,” Friday, October 31, 2014; http://www.centerltc.com/bullets/archives2014/1062.htm

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Updated, Monday, May 15, 2017, 10:05 AM (Pacific)

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LTC E-ALERT #17-018: LTC NEWS AND COMMENT

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:

What We Know for Sure About In-Retirement Withdrawal Rates
The House Health Bill: Bad For Seniors, Bad For Long-Term Care Insurance
Gender gap in Alzheimer’s disease rates, caregiving needs more attention
Medicare Advantage beneficiaries less likely to use post-acute care, analysis finds
IRS announces bump in 2018 HSA limits
Thin People Not More Prone to Alzheimer's, Study Finds
In-home care of dementia patients falls mainly on women, researchers say
Life expectancy differs by 20 years between some US counties
Caring for Aging Parents Costing Canadians $33B Annually
More Older Couples Are ‘Shacking Up’
Retirees, Survive and Thrive in the Gig Economy
Getting lost could be the first sign of Alzheimer's, finds new study

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Updated, Friday, May 12, 2017, 9:12 AM (Pacific)

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LTC BULLET: HOW MUCH COULD MEDICAID SAVE?

LTC Comment: If Medicaid did not exempt up to $840,000 of home equity, how much could taxpayers save and what would happen to long-term care access and quality? Answers after the ***news.***

*** DO YOU BELONG to the Center for Long-Term Care Reform? We send these LTC Bullets to Center members every week and to a much wider emailing list when they’re sponsored. So, if you’re not getting a weekly infusion of LTC information and analysis from us, but you appreciate these Bullets when you do receive them, then join the Center today. We’re fighting for public policies to encourage responsible long-term care planning. So are you. Help us help you. Join the Center. Contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: HOW MUCH COULD MEDICAID SAVE?

LTC Comment: Medicaid is at the center of the current debate over repealing and replacing ObamaCare. But most of that discussion centers on acute care for low-income young people, the side of Medicaid that touches the most individuals, but costs disproportionately less than long-term care for the elderly. Let’s consider instead how changing Medicaid’s treatment of home equity for the elderly in need of long-term care could save much more money and improve care access and quality in the process.

If Congress and the Trump Administration eliminated Medicaid’s $560,000 to $840,000 (depending on the state) home equity exemption for long-term care eligibility, how much could taxpayers save on Medicaid expenditures and what would the ramifications be for care access and quality? To answer this question requires taking into account the disproportionality of Medicaid long-term care spending by enrollee type and eligibility status.

Total Medicaid spending for federal fiscal year 2015 was $545.1 billion (3.0 percent of Gross Domestic Product), but these funds were not distributed evenly among enrollees.^{^[1]}^{-^[2]} Medicaid’s long-term care recipients consume an uneven share of total program expenditures. For example, people eligible for Medicaid and Medicare or "dual eligibles" accounted for 36 percent of Medicaid spending in 2010, although they comprised only 14 percent of Medicaid recipients.^{^[3]} These dual eligibles are heavy users of long-term care, which comprised 65 percent of their Medicaid expenditures.^{^[4]} The aged, blind and disabled--also heavy users of long-term care--are one-fourth of Medicaid recipients (24 percent) but account for nearly two-thirds of program costs (63 percent), whereas younger recipients, mostly poor women and children, are three-fourths of the recipients (75 percent) but consume only a little more than one-third of the cost (36 percent).^{^[5]}^{-^[6]}

Researchers and policy makers are trying to find ways to manage dual eligibles more cost-effectively, but no one, until now, has focused on how to prevent people from becoming dual eligibles in the first place. Because dual eligibles and the aged, blind and disabled (ABD) consume a disproportionate share of Medicaid's total resources, every actual or potential dual eligible, ABD or long-term care recipient diverted from Medicaid dependency will result in a highly leveraged savings to the Medicaid program. In other words, prevent Medicaid dependency for even a small number of these heavy long-term care users, and the savings will be extraordinarily high.

Why do people become dual eligibles and how could they be diverted from that fate? Easy access to Medicaid long-term care eligibility after care is needed has discouraged early and responsible long-term care planning. People who come to need long-term care, but failed to plan for it, ultimately end up with very limited income and assets. Whether they qualify for Medicaid genuinely by spending down their wealth for care or artificially by taking advantage of the program’s generous exemptions, eligibility loopholes or Medicaid planning, such people automatically become dual eligibles when they turn 65 years of age and qualify for Medicare.

The greatest asset they retain, and often preserve for heirs by avoiding estate recovery, is their home equity. If home equity were at risk to pay for long-term care, it would take longer for homeowners to qualify and fewer people would end up as Medicaid recipients. Therefore Medicaid would have fewer dual eligibles to support for shorter periods of time.

Medicaid spent $139 billion on 9.6 million dual eligibles in 2010.^{^[7]} Fifty-nine percent of dual eligible enrollees were 65 years of age or older and accounted for 60 percent of Medicaid spending on dual eligibles.^{^[8]} Thus, 5.7 million dual eligibles over age 65 consumed $83.4 billion for an average of $14,632 per dual. Further, we know that 76 percent of Medicare beneficiaries owned home equity in 2016 and their median equity was $70,950.^{^[9]} These figures are very conservative predictors of home equity conversion’s potential to fund long-term care, because the percentage of homeowners and their equity in their homes may well have been much higher a decade or two earlier, when they could have taken measures to protect their homes’ value by saving, investing or insuring against long-term care risk.

If Medicaid no longer exempted home equity from long-term care risk and cost, those 76 percent of Medicare beneficiaries with median home equities of $70,950, and especially those with equities above the median whom Medicaid currently protects up to $560,000 to $840,000 (greater than the 95^th percentile) would be strongly incentivized to plan for long-term care. Otherwise, if they came to need expensive paid care and lacked other resources, they would need to take out reverse mortgages to fund the care and thus deplete their home equity, ultimately becoming dependent on Medicaid but only after spending down their real estate wealth.

What might the potential savings to Medicaid be? If one in five of the 5.7 million age-65-plus dual eligibles in 2010 had taken measures earlier to protect their home equity from long-term care spend down, the savings to Medicaid would have been $16.7 billion (20 percent of the $83.4 billion actually spent in that year).

Is such a reduction in dual eligibles feasible? The actual reduction would probably be even greater. According to the National Council on the Aging,

With an estimated amount of over $72,000 available on average to older households from these loans, reverse mortgages can help impaired elders pay for several years of daily home care visits, over a decade of out-of-pocket expenses and respite for family caregivers, or substantial home modifications.^{^[10]}

That much money added to other income and assets and used for long-term care, especially private home and community-based services, could delay or prevent Medicaid eligibility for millions of Americans. The savings to Medicaid would easily exceed $20 billion per year in combined state and federal expenditures, probably much more. Over time, Medicaid savings would increase rapidly beyond these initial estimates as more and more people plan ahead to pay their own long-term care expenses by means of real asset spend down (instead of Medicaid planning), home equity conversion or private long-term care insurance, a product whose market will only expand if and when it becomes needed to protect home equity from long-term care expenses.

The potential benefits to America’s long-term care service delivery and financing system from engaging home equity to fund care go far beyond Medicaid savings.

Spending their own money, consumers will purchase care they prefer, aging in place instead of being drawn into institutional settings that Medicaid often requires.
Paying private market rates for care, consumers will command red-carpet access to top quality care instead of relying on Medicaid’s notoriously meager reimbursement rates.
Medicaid itself, with fewer expensive dual eligibles to support, would have more resources to provide better care in the most appropriate settings for people genuinely in need of the help.

Drawing the enormous potential resource of home equity into the financing of long-term care would thus improve care access and quality for all people irrespective of their private-pay or Medicaid status. It would also create new jobs in the reverse mortgage and long-term care insurance businesses generating substantial new tax revenue and further strengthening the economy. Most importantly, putting home equity to work funding long-term care would finally end the perverse incentive in public policy that discourages planning ahead and leaves too many people dependent on public welfare.

[1] Anne B. Martin, Micah Hartman, Benjamin Washington, Aaron Catlin, and the National Health Expenditure Accounts Team, “National Health Spending: Faster Growth In 2015 As Coverage Expands And Utilization Increases,” Health Affairs, Vol. 34, No. 1, January 2017, p. 2; [LINK].
[2] United States GDP, 1960-2017; http://www.tradingeconomics.com/united-states/gdp.
[3] Katherine Young, Rachel Garfield, MaryBeth Musumeci, Lisa Clemans-Cope, and Emily Lawton, “Medicaid's Role for Dual Eligible Beneficiaries,” The Kaiser Commission on Medicaid and the Uninsured, Washington, D.C., August 2013, p. 1; http://kaiserfamilyfoundation.files.wordpress.com/2013/08/7846-04-medicaids-role-for-dual-eligible-beneficiaries.pdf
[4] Ibid., p. 2.
[5] Kaiser Family Foundation, StateHealthFacts.org, “Distribution of Medicaid Enrollees by Enrollment Group,” cited May 8, 2017;
http://kff.org/medicaid/state-indicator/distribution-of-medicaid-enrollees-by-enrollment-group/.
[6] Kaiser Family Foundation, StateHealthFacts.org, “Medicaid Spending by Enrollment Group,” cited May 8, 2017; http://kff.org/medicaid/state-indicator/medicaid-spending-by-enrollment-group/.
[7] Katherine Young, Rachel Garfield, MaryBeth Musumeci, Lisa Clemans-Cope, and Emily Lawton, “Medicaid's Role for Dual Eligible Beneficiaries,” The Kaiser Commission on Medicaid and the Uninsured, Washington, D.C., August 2013, pps. 7, 4; http://kaiserfamilyfoundation.files.wordpress.com/2013/08/7846-04-medicaids-role-for-dual-eligible-beneficiaries.pdf
[8] Ibid., p. 2.
[9] Gretchen Jacobson, Shannon Griffin, Tricia Neuman, and Karen Smith, “Income and Assets of Medicare Beneficiaries, 2016 – 2035,” Kaiser Family Foundation Issue Brief, January 2014, p. 5; http://files.kff.org/attachment/Issue-Brief-Income-and-Assets-of-Medicare-Beneficiaries-2016-2035.
[10] Barbara R. Stucki, “Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action,” National Council on the Aging, Washington, D.C., 2005, p. iv; https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reports/downloads/stucki_2005_4.pdf

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Updated, Monday, May 8, 2017, 10:00 AM (Pacific)

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LTC E-ALERT #17-017: LTC NEWS AND COMMENT

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:

Profile: Christopher Perna
Who Pays For Aging?
AHIP Sees 28% Increase in Medigap Enrollment Among Seniors
Americans Not Ready to Help Themselves
States with higher elderly populations will have more open nursing slots to fill, report predicts
The Nation’s Fiscal Health: Action is Needed to Address the Federal Government’s Fiscal Future
Helping families navigate healthcare maze may offer competitive advantage, experts advise
DOJ: UnitedHealth ignored beneficiary conditions to bilk Medicare
Humana Breakup, Penn Treaty Charge Hit Aetna Earnings
Caregiver Shortage Reaches Critical Stage
Baked fish, chair yoga, and life lessons: To learn to care for elderly, students move into retirement home
Let IRA Cash Pay for Long-Term Care Insurance: NAIC
Many Patients With Alzheimer's Disease Discontinue AChEIs

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Updated, Friday, May 5, 2017, 9:59 AM (Pacific)

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LTC BULLET: MEDICAID MATTERS MOST

LTC Comment: Medicaid is not just a factor in long-term care financing; it is the factor overshadowing all others. Why and how?

LTC BULLET: MEDICAID MATTERS MOST

“The simplest answer is most often correct.” Occam’s Razor

“Give me a lever long enough and a fulcrum strong enough and single-handed I can move the world.” Archimedes

Long-term care financing is complicated. Think of all the research studies, journal articles and special commissions that have grappled with it unsuccessfully for decades. Recall the myriad variables, perplexing questions, noble goals and stubborn obstacles standing in the way of progress. Just to name a few:

Who should pay? Are people responsible or is government? Should planning be voluntary or compulsory? Why do people ignore long-term care risk and cost until too late to prepare? How can nursing home bias prevail when people prefer cheaper home care? Why is long-term care fraught with access and quality problems? How can we spend so much on long-term care but the sector remains starved for funding? Why is caregiver compensation so low and who will do that work in the future for minimum wages? What is going to happen when the age wave finally crests and crashes in the 2030s?

The usual policy analysts’ response to these perplexities is to wring their hands and conclude the government must compel people to prepare for long-term care by paying higher taxes. But what if public financing is what caused our long-term care dysfunctions in the first place? What if the questions and problems we face have a simple answer? Could Occam’s Razor and Archimedes’ leverage principle apply to long-term care? What is the simplest way to fix long-term care financing?

Medicaid is not just a factor of long-term care financing. It is the critical factor. Since its founding in 1965, Medicaid has evolved from a minor funder to become the primary payor for formal paid care. Its near monopsony status has serious ramifications. Because Medicaid requires state programs to pay for nursing home care, it has an institutional bias. Because it pays notoriously low reimbursement rates, Medicaid causes caregiver shortages and access and quality problems. Because it pays for care whenever needed, Medicaid enables the public’s denial of long-term care risk and cost. Because it pays after the insurable event occurs, Medicaid crowds out private long-term care insurance. Because it pays increasingly for home care, Medicaid inhibits the private home care market. Name a deficiency of long-term care service delivery or financing and you will find Medicaid at the root of it.

Many policy analysts will agree with that assessment or some parts of it. They too blame Medicaid for numerous long-term care problems, but for different reasons. They claim Medicaid requires impoverishment; that people must spend down their life’s savings to qualify for long-term care benefits; and that wide swaths of the American public are devastated by catastrophic expenditures before they receive help from Medicaid. What these analysts do not and cannot explain is that, if Medicaid requires impoverishment, why do most people ignore this calamitous risk, fail to plan, save, invest or insure for long-term care, and end up dependent on a means-tested welfare program? Most analysts cannot explain this logical contradiction, so they evade it.

Here’s the key to unlock this confusing conundrum of long-term care financing quandaries. Medicaid long-term care benefits do not require impoverishment. Virtually unlimited income does not obstruct eligibility if medical and long-term care expenses are high enough, as they usually are for people in need of formal, paid long-term care. Virtually unlimited assets are exempt in the form of home equity (between $560,000 and $840,000), one business, one auto, IRAs paying periodically, term life insurance, Medicaid-compliant annuities, life care contracts, prepaid burials, personal belongings, and home furnishings. Over and above these routine exemptions, the use of trusts, “spousal refusal,” disinheritance, divorce and numerous sophisticated “Medicaid planning” techniques make access to Medicaid long-term care benefits available to almost anyone who chooses to take advantage of the program.

Once you realize that Medicaid does not require impoverishment, all the puzzles associated with long-term care financing disappear. If people can ignore the risk of long-term care, avoid the premiums for private insurance, wait to see if they ever need expensive paid long-term care and if they do, transfer most of the cost to Medicaid, then everything else follows logically. Most people do not plan for long-term care; they end up on Medicaid by default if they need care; and Medicaid pays for most care, overburdening its scarce resources. Consequently Medicaid has too little revenue to pay care providers adequately which causes caregiver shortages and other access and quality problems. Quad erat demonstrandum.

Q.E.D., notwithstanding, this analysis has not prevailed in the marketplace of ideas. That’s why the Center for Long-Term Care Reform’s new report, titled “How to Fix Long-Term Care Financing,” will document the argument and the evidence for it conclusively. It will prove beyond any doubt that access to Medicaid long-term care benefits does not require impoverishment. It will explain why most analysts wrongly claim that Medicaid does require impoverishment. It will describe Medicaid’s true role as the dominant factor in long-term care financing and trace the history of how it became that way. It will recount how frequent efforts to target Medicaid’s limited resources to its originally intended needy recipients have failed repeatedly. It will explain why such efforts ended entirely in 2005, show no signs of recurring, and must begin anew to salvage long-term care financing. Finally the new report will propose simple solutions to improve Medicaid as a long-term care safety net for people in need while improving the access to and qualify of long-term care for people of all economic levels.

Stay tuned.

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Updated, Monday, May 1, 2017, 9:59 AM (Pacific)

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LTC E-ALERT #17-016: LTC NEWS AND COMMENT

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:

More American Waiting Later to Claim Social Security
Many Patients With Alzheimer's Disease Discontinue AChEIs
Ohio House delays Medicaid changes for long-term care patients
Here Are 5 Tips To Help Workers Plan For The Inevitable: Getting Older
The Answers to Common Reverse Mortgage Questions
This Important Insurance Is Becoming A Luxury for Retirees
Paying for LTSS via Medicare would improve outcomes, lower costs: report
Workers Maintain or Increase Income After Claiming Social Security: ICI
The Priciest Metros for Assisted Living, Memory Care
04 13 17 AARP Dychtwald Chatzky Capitalizing on the Emerging Longevity Marketplace
LTCi: Not Your Average Voluntary Benefit
The disabled and the elderly are facing a big problem: Not enough aides

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Updated, Friday, April 28, 2017, 9:00 AM (Pacific)

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LTC BULLET: HOIST WITH ITS OWN PETARD

LTC Comment: This Kaiser Family Foundation “Issue Brief” blows up its own argument, after the ***news.***

*** LTC CLIPPINGS subscribers received this tip from us on Monday.

4/24/2017, “04 13 17 AARP Dychtwald Chatzky Capitalizing on the Emerging Longevity Marketplace,” by Ken Dychtwald, YouTube

Quote: “At the recent AARP Innovations@50+ sold-out gathering of entrepreneurs and investors, Ken Dychtwald offered a mind-stretching glimpse into the longevity-based future and explored which industries, products and services will dominate the longevity marketplace – most of which are currently hiding in plain sight. After a brief presentation, he was joined by NBC’s Jean Chatzky for a candid and illuminating fireside chat about ageism, longevity and personal ups and downs in life’s second half.”

LTC Comment: Watch this half hour video, especially the first half, and emerge re-motivated.

To inquire or subscribe to our LTC Clippings service, contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: HOIST WITH ITS OWN PETARD

LTC Comment: 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.” That’s the argument Kaiser Family Foundation scholars Gretchen Jacobson, Shannon Griffin, Tricia Neuman, and Karen Smith try to make in the latest (April 2017) update of KFF’s “Issue Brief” titled “Income and Assets of Medicare Beneficiaries, 2016-2035.”

What they inadvertently prove instead is that most Medicare beneficiaries are actually quite well off. What they miss entirely is that affluent beneficiaries capture a disproportionate share of Medicaid’s long-term care benefits. Bottom line, both Medicare and Medicaid could benefit from public policy changes to direct their scarce resources to enrollees who are most in need.

Here’s the crux of the KFF argument:

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 and addressing 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. (pps. 6-7)

OK, that’s one way of looking at the data. Here’s another.

Income

Half of all Medicare beneficiaries have incomes of $26,200 or less. That’s more than double the $12,060 poverty guideline for a single person as of 2017, but poor enough to be sure.^{^[1]} These are the people we would 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 USA.^{^[2]}

But what about the other half of Medicare beneficiaries? Forty-five percent of them had incomes between $26,200 and $103,450. Hardly impoverished. Could someone with an annual income of $103,450, at the 95^th percentile of all Medicare beneficiaries, qualify for Medicaid LTC benefits? Yes. All it would take is the cost of a nursing home at a little more than the median national rate for a semi-private bed ($82,128), 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.

Several scholars have recognized this reality. Research published in the American Economic Review, for example, found not only that retirees with high incomes can enroll in Medicaid, but that when they do, the cost to taxpayers is actually higher than the cost for low-income individuals.^{^[3]}

Savings

Turning to savings of Medicare beneficiaries, we find the same upside down policy incentives. The 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.” (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, IRAs, 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 $560,000 to $840,000 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, and reverse half-a-loaf strategies; or they can simply divest their savings five years or more before applying for Medicaid as most elder law attorneys recommend.

Because it’s easy and financially beneficial to qualify for Medicaid LTC benefits while sheltering or divesting up to $1.4 million (the 95^th percentile of Medicare beneficiaries’ savings) or more, Medicaid planning attorneys do a land-office business often in practices with multiple geographic locations. Dubious? Google “Medicaid planning in [your state]” for proof.

Home Equity

By now it should come as no surprise that the same topsy-turvy public policy applies to home equity as well.

Seventy-six percent of Medicare beneficiaries owned home equity in 2016. Their median equity was just $70,950. (p. 5) Only five percent of enrollees had home equity of more than $466,600, with just one percent owning equity worth $873,150 or more. Given Medicaid’s high home equity exemption ranging from $560,000 to $840,000 – depending on the state – it is unlikely that this limit disqualifies many people.

Once again, the lower financial half of Medicare beneficiaries qualify easily for Medicaid LTC benefits based on home equity, but so do the upper half!

LTC Comment: This KFF issue brief tries to sidetrack policymakers from addressing Medicare’s fatal fiscal flaws by focusing on beneficiaries below the financial median. But, contra the KFF argument and conclusions, most Medicare beneficiaries are doing quite well financially. Furthermore and ironically, with tragic consequences for the genuinely needy half of beneficiaries, the better off group is co-opting desperately needed long-term care resources that should go to the needier group.

The fact that affluent whites live longer than poor minorities, consume a disproportionate share of Medicaid’s scarce resources, and plan for that eventuality as a result of incentives created by existing policies raises serious ethical questions—not because Medicaid forces people into impoverishment as usually assumed, but for precisely the opposite reason.

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[1] U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal Programs; https://aspe.hhs.gov/poverty-guidelines.

[2] Thirty-four states have “medically needy” Medicaid programs. “The medically needy program provides states the option to extend Medicaid eligibility to individuals with high medical expenses whose income exceeds the maximum threshold, but who would otherwise be eligible for Medicaid.” (Kaiser Commission on Medicaid and the Uninsured, “The Medicaid Medically Needy Program: Spending and Enrollment Update,” Issue Brief, December 2012; https://kaiserfamilyfoundation.files.wordpress.com/2013/01/4096.pdf) “But some states set a hard limit on the income permissible to qualify for Medicaid -- no [income] spend-down is allowed. In these states, known as ‘income cap’ states, eligibility for Medicaid benefits is barred if the nursing home resident's income exceeds $2,199 a month (for 2016), unless the excess income above this amount is paid into a ‘(d)(4)(B)’ or ‘Miller’ trust.” (Elderlaw Answers, “How Does Medicaid Treat Income?,” cited August 8, 2016; http://www.elderlawanswers.com/how-does-medicaid-treat-income-12017)

[3] De Nardi M, French E, Jones JB. Medicaid insurance in old age. Am Econ Rev. 2016;106(11):3480-520.

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Updated, Monday, April 24, 2017, 11:15 AM (Pacific)

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LTC E-ALERT #17-015: LTC NEWS AND COMMENT

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:

Dementia, stroke risk linked with diet soda consumption
The Average Cost of Retirement Is $738,400: Will You Have Enough?
States bolstering efforts to fight Medicaid waste, fraud in wake of GAO report
Retirement Planning When There's an Age Gap
Don’t Let Long-Term Care Costs Devastate Your Retirement
Senior living can cost less than aging in place at home: analysis
Sen. Grassley Demands Scrutiny Of Medicare Advantage Plans
Business is booming for Long Term Care Partners
Tax Freedom Day 2017 is April 23rd
Long-term care insurance facing major pricing shift
Short-Term Care Insurance: An Alternative to the Long-Term Care Variety
Medicare Recipients Experience Multiple Care Transitions at End of Life
Canadian Brain Health Diet Shows Promise in Reducing Risk of Alzheimer’s Disease

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Updated, Friday, April 21, 2017, 9:00 AM (Pacific)

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LTC BULLET: VICTORY! MODEL LTC EDUCATION/PLANNING BILL ENACTED IN MARYLAND

LTC Comment: Kudos to Maryland activists for new LTC education and planning task force legislation just signed by Governor Larry Hogan. Details after the ***news.***

*** CLTCR Premium Membership -- Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including:

All LTC Bullets and E-Alerts
Access to our Members-Only Zone website and Almanac of Long-Term Care
Subscription to our Clipping Service
Email/phone access to Steve Moses for 24-hour turnaround queries

Our Premium Membership is designed to give you a competitive advantage in your long-term care profession. Your increased knowledge of the critical issues and challenges we face in the field of long-term care service delivery and financing equals improved professional success for you and better LTC services for your clients and for those who have no choice but to rely on scarce public resources.

Stay on the forefront of professional knowledge and help us fight for rational long-term care policy reform by contacting Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month. ***

LTC BULLET: VICTORY! MODEL LTC EDUCATION/PLANNING BILL ENACTED IN MARYLAND

LTC Comment: Thanks to the indefatigable efforts of resident “LTCi geeks,” especially the “Maryland Roundtable,” Melissa Barnickel, and Center Premium Elite member Sally Leimbach of TriBridge Partners, LLC, with the support and encouragement of NAHU and NAIFA state chapters and industry associations AHIP and ACLI, the “America-in-Miniature” state of Maryland will have a “Task Force on Long–Term Care Education and Planning” starting June 1, 2017.

On April 18, Republican Governor Larry Hogan signed the bipartisan authorizing legislation, passed recently by the Democrat-dominated state legislature. The task force’s mission is to:

(1) examine the status of long–term care education in the State; (2) consider options for improving efforts to educate residents of the State about planning for long–term care; and (3) make recommendations regarding long–term care education, including recommendations regarding education methods that will: (i) ensure that no Maryland resident reaches the age of 50 without having received complete information about the risk of needing long–term care and the private options available to pay for long–term care; and (ii) include information about the Maryland Medical Assistance Program [aka Medicaid], how the Program is funded, and whom the Program is intended to serve.

Why does Maryland need such a task force? According to the Act’s preamble:

WHEREAS, Baby boomers represent 15% of the U.S. population and Maryland is home to 1.5 million baby boomers; and

WHEREAS, About one–quarter of the 1.5 million baby boomers in the State will require long–term care that will cost at least $100,000 over the course of their lifetimes, with nearly two–thirds of this population having to pay for this care out of pocket; and

WHEREAS, A number of Maryland residents may not understand that they may not be able to rely on the State and federal government to pay for their long–term care needs; and

WHEREAS, Many Maryland residents may be under a misconception that the Maryland Medical Assistance Program and other State programs will sufficiently cover the cost of their long–term care; and

WHEREAS, Maryland residents are in need of education regarding the cost of and need for planning for long–term care; now, therefore,

This effort to educate the public about long-term care planning is needed in Maryland and in every other state.

Who will serve on Maryland’s new LTC education and planning task force?

(1) the Secretary of Aging, or the Secretary’s designee;

(2) the Secretary of Health and Mental Hygiene, or the Secretary’s designee;

(3) the Maryland Insurance Commissioner, or the Commissioner’s designee; and

the following members, appointed by the Governor:

(i) one representative of the Maryland Association of Certified Public Accountants;

(ii) one representative of the Maryland Bar Association;

(iii) one representative of the Financial Planning Association of Maryland;

(iv) one representative of the Maryland Association of Health Underwriters;

(v) one representative of the National Association of Insurance and Financial Advisors of Maryland; and

(vi) one representative of the Maryland Association of Private Colleges and Career Schools; and

(vii) one representative of the Health Facilities Association of Maryland.

The Governor shall designate the chair of the Task Force.

United Seniors of Maryland shall provide staff for the Task Force.

December 1, 2017 is the Task Force’s deadline to report its findings and recommendations to the Governor and the General Assembly. Let’s hope this initiative is more successful than its many state- and federal-level LTC-study-committee predecessors. Given the energy, enthusiasm and perseverance of the people who designed and promoted this task force, we can have every reason to believe it will raise public awareness of the critical need for early and effective long-term care education and planning.

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Updated, Monday, April 17, 2017, 9:38 AM (Pacific)

Seattle—

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LTC E-ALERT #17-014: LTC NEWS AND COMMENT

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:

CMS data shows racial, ethnic, gender disparities in Medicare Advantage care
Type A and C contracts increasing in popularity with CCRCs
Assisted living occupancy falls to lowest level since 2010
Starbucks China to offer critical illness insurance plans for employees’ parents
Regulators Form Long-Term Care Insurer Solvency Team
Medicare Part C For All -- A Proposed Hatch-Warren Bill
Should Medicaid Be Converted to a Block-Grant Program?
$125,000 NIC study will assess demand for middle-market seniors housing
Charitable giving: It’s not just about taxes
Elderly home care scheme is likely to be means-tested
New ‘Immediate Need’ Annuity Listed on Exchange
PBS Program Takes Deep Dive into Reverse Mortgages
How skillful RMD planning can sustain retirement portfolios

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Updated, Friday, April 14, 2017, 11:05 AM (Pacific)

Seattle—

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LTC BULLET: LTC POLICY POLL RESULTS

LTC Comment: Attendees at the recent LTC insurance conference voted on some interesting questions about how the new political landscape is likely to affect the market for their product. Results and our comments after the ***news.***

*** DO YOU KNOW? How skillful RMD planning can sustain retirement portfolios and help close the LTCI sale? How advisers are warming to reverse mortgages? How LTC providers are just as worried about middle-market seniors as LTC insurers are and why? The pros and cons of converting Medicaid to a block-grant program? Why “Medicaid Part C for All” might actually be worth considering? That assisted living occupancy is way down? You would know the latest news on these subjects this week if you subscribed to our LTC Clippings service. We send subscribers an average of two emails per work day linking to critical news, reports or data you need to know to stay on the forefront of professional expertise. Steve or Damon Moses scan the media, choose the key articles, and forward links to you with their one or two sentence analysis. To inquire or subscribe, contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: LTC POLICY POLL RESULTS

LTC Comment: The 17^th Annual Inter-Company Long-Term Care Insurance Conference’s closing general session on March 28 explored the topic “New President and Congress: Implications for Aging and LTC Finance.” For a summary and analysis of that session and the conference as a whole, see last week’s “LTC Bullet: The 17^th Annual Inter-Company Long-Term Care Insurance Conference: A Virtual Visit.”

At the closing session, attendees were invited to vote by means of their smart phones on answers to the questions below. Conference IT Manager Christi Trimble of Meeting Masters, Inc. informs us that “the questions averaged 225 responses, which is about 40-50% of those in attendance.” Here are the queries and the polling results with our “LTC Comment” after each.

Q1. Given the results of Election 2016, how are you feeling about the prospects for our industry over the next 4 years? (NOTE: We define "industry" to encompass all private finance options - past, present and future product types)

1. Very optimistic = 11%
2. Somewhat optimistic = 46%
3. Somewhat pessimistic = 27%
4. Very pessimistic = 6%
5. I'm too depressed to even answer = 10%

LTC Comment: I hold with the 57-percent optimistic group, not the 43-percent down-in-the-dumps crowd. LTCI has nowhere to go but up. Government policies (zero interest rates and easy access to Medicaid after care is needed) made the product unprofitable and unwanted, respectively. But LTCI survived somehow. Now it’s the government policies that are bound to fail. The more the public realizes Social Security, Medicare and Medicaid will no longer subsidize failure to plan, save, invest, and insure, the more we’ll see a resurgence of LTC insurance. Keep the faith!

Q2. Which of the following policies should the Trump administration and Congress pursue as ways to improve private LTC financing? (pick your top 3)

1. Allow use of health/retirement accounts to buy LTCI = 26%
2. Employer tax incentive to offer LTCI = 18%
3. Tax credits for family caregivers = 9%
4. Medicaid reforms = 6%
5. Establish public LTC benefit = 4%
6. Reinsurance pools = 3%
7. Reduce regulatory burden on private coverage = 11%
8. Public education = 9%
9. Improve the economy for middle market Americans = 10%
10. Other = 2%
11. None of the above = <1%

LTC Comment: Thankfully, more government spending (tax credits for caregivers and a new public program) scored low. Reducing government interference (allowing IRA deductions for LTCI and cutting regulations) rightly scored higher. But, alas, Medicaid reform polled low. None of the other measures will help until Medicaid stops giving away what LTC insurers are trying to sell—to the very people who should, would, and could buy LTCI in the absence of perverse Medicaid policies that discourage its purchase.

Q3. Which changes in the political landscape do you think will have the most favorable impact on prospects for private LTC financing solutions? (pick your top 3)

1. Republican President = 14%
2. Republican Congress = 14%
3. Proposed Medicaid program changes = 18%
4. Proposed changes to private health insurance 16%
5. Proposed Medicare reforms 10%
6. Administrative appointments 5%
7. None of these will favorably impact = 22%
8. All of these will favorably impact 2%

LTC Comment: I chose the first three options, but not for the obvious reasons. I don’t think it matters so much that the Republicans are in charge as that the whole political apple cart has been over-turned. We were on a set course locked in for eight years that seemed inevitable to continue in lock step. It didn’t! Now, anything is possible. That means danger, but also opportunity. One opportunity is to change Medicaid LTC financing for the better by targeting its scarce resource to the needy and directing some of the savings to educating and incentivizing the aging middle class to plan responsibly for long-term care. Will it happen? I’m optimistic despite the recent slap down of a plan to block grant Medicaid. That might have empowered states to close LTC eligibility loopholes and reduce the program’s gargantuan home equity exemption. But Medicaid will re-emerge because the potential savings are huge and they’re needed to facilitate tax reform which is critical to re-charging the economy. Finally, how sad that 22 percent of the respondents think nothing will help. Kind of shows how beaten down the LTCI business and some of its practitioners are.

Q4. Which change in the political landscape do you think will have the most significant negative impact on prospects for LTC insurance? (pick your top 3)

1. Republican President = 12%
2. Republican Congress = 9%
3. Proposed Medicaid program changes = 14%
4. Proposed changes for private health insurance = 11%
5. Proposed Medicare reforms = 14%
6. Administrative appointments = 12%
7. None of these will favorably impact = 18%
8. All of these will favorably impact = 2%

LTC Comment: Negative impact? None. When you’re on a disastrous course, just about any change is for the better. I’ll elaborate below.

Q5. How do you think the proposed changes to Medicaid will impact market potential for private LTC finance products?

1. Expand market potential = 41%
2. Reduce market potential = 17%
3. Make no difference = 41%

LTC Comment: Never mind the ObamaCare repeal and replace issue. That affects mostly young Medicaid recipients. What matters for LTC financing is the plan to block grant or cap Medicaid grants to states, ending the unlimited federal financial participation system that invites over-spending. Given less money and more flexibility, 50 state Medicaid programs will begin experimenting with new ways to control costs, including the ones we’ve recommended in dozens of state- and federal-level reports. For example, stop exempting up to $840,000 in home equity. Encourage people to rely instead on reverse mortgages to pay for home care. You’ll get more people receiving better care and aging in place as they prefer. That won’t go on long before their adult children start deciding LTC insurance isn’t so expensive after all. I can only assume the poll results, that 17 percent think fixing Medicaid would reduce the LTCI market and 41 percent think it would make no difference, reflects a lack of understanding on the part of too many attendees of Medicaid’s enormously constricting effect on LTCI demand.

Q6. How might the new political landscape impact insurers' ability to obtain rate increases?

1. Make it easier = 22%
2. Make it harder = 24%
3. Make no difference = 53%

LTC Comment: I’ll side with the “make no difference” majority, although increased Republican domination in statehouses and state legislatures may help if the Rs are true to their avowed free-market ideology. It is hypocritical for government—local, state for federal—to oppose rate increases to ensure carriers’ ability to meet their obligations to insureds. Compare that responsible action by private sector companies with the vast unfunded liabilities for “social insurance” programs forced on the public by government—for which nothing has been done to ensure they can meet their obligations.

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.)

Q8. Taking everything into account, how do you think the current political climate will impact consumers' interest in private LTC finance options?

1. Increase it - they can't rely on government 17%
2. Decrease it - they have too much else to worry about 25%
3. Stay the same 25%
4. Could get better or worse - depends on specific policies and appointments = 33%

LTC Comment: The answer to this question depends entirely on how successfully the new Administration implements policies to reform and reduce wasteful, counter-productive programs, especially Medicaid. Results so far are disappointing, but let’s stay tuned. The reason consumers don’t worry about long-term care or take an interest in LTC planning is that they don’t think they’ll need it. No amount of “educating” them that they need LTC insurance will succeed as long as they can ignore the risk, avoid the premiums, wait to see if they ever need LTC, and if they do, transfer most of the cost to taxpayers while retaining the bulk of their estates for heirs.

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Updated, Monday, April 10, 2017, 10:20 AM (Pacific)

Seattle—

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LTC E-ALERT #17-013: LTC NEWS AND COMMENT

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:

5 ways senior living communities are evolving to attract active baby boomers
Lack of quality applicants is top workforce challenge: survey
Should the Social Security Trust Fund Be Allowed to Invest in Stocks?
5 Long-Term Care Hybrid Perspectives
Cognitive decline after surgery tied to brain's own immune cells
To Help Ward Off Alzheimer’s, Think Before You Eat
Study: To reduce readmissions, involve caregivers in discharge planning
Brain scans may reveal mental secret of ‘Super Agers’
U.S. raises Medicare payments to insurers by 0.45 pct in 2018
Higher education employees lack retirement confidence
Boomerang seniors: Aging adults move to be near Mom or Dad
1 in 5 Older Americans Doesn't Ever Expect to Retire

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Updated, Friday, April 7, 2017, 11:13 AM (Pacific)

Seattle—

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LTC BULLET: THE 17^TH ANNUAL INTER-COMPANY LONG-TERM CARE INSURANCE CONFERENCE: A VIRTUAL VISIT

LTC Comment: In case you couldn’t be there, today’s LTC Bullet provides a glimpse into an exceptional industry meeting convened last week in Jacksonville, Florida, after the ***news.***

*** PAST IS PROLOGUE: The last time the ILTCI conference convened in Jacksonville, Florida was 2008 during the Center for Long-Term Care Reform’s “National LTC Consciousness Tour.” We parked the “Silver Bullet of Long-Term Care” right in front of the Hyatt Regency venue, stocked the fridge with refreshments, and opened the little Airstream trailer as a “hospitality suite” for all visitors. Check out our review of that year’s conference: “LTC Bullet: The Jacksonville LTCI Conference,” Thursday, March 20, 2008. ***

*** WE NEED YOU. Every time I attend a major industry conference like the one described in today’s LTC Bullet, I’m gratified by the many expressions of appreciation I receive for our work at the Center for Long-Term Care Reform. Thank you! But let me make this appeal, if you are receiving our content forwarded by others, please consider joining the Center on your own. The only thing that makes our contribution to improving long-term care financing policy possible, is the support we receive from our very special individual and corporate members. So, please, if you get value from our publications and you appreciate our advocacy on behalf of responsible LTC public policy, lend us your support by joining and contributing to the Center and our common mission. Contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: THE 17^TH ANNUAL INTER-COMPANY LONG-TERM CARE INSURANCE CONFERENCE: A VIRTUAL VISIT

LTC Comment: This year’s big LTC insurance industry conference with the theme “Navigating the Future” wrapped up last week at the Hyatt Regency in Jacksonville, Florida. Attendance was 868, down somewhat from the past two years, but the highest of any before that. The quantity and quality of sessions, as well as the opportunities for networking, not to mention the exhibit-hall food and drink, were as plentiful and rewarding as ever.

If you were lucky enough to attend this year’s conference, Christi Trimble urges you to complete the evaluation survey here. If you’d like to participate as a volunteer in next year’s program, contact Jim.Glickman@LifeCareAssurance.com.

What follows are some quick impressions of the sessions I attended. These are not a representative sample of the conference content as I visited almost exclusively the program’s “Alternative Solutions” track. Special thanks to Eileen Tell and John O’Leary for the hard work they expended to put together the sessions comprising the Alternative Solutions Track. The other tracks were Actuarial & Finance; Claims & Underwriting; Combination Products; Legal, Compliance & Regulatory; Management, Operations & Technology; and Marketing & Distribution. The conference also featured a vast exhibit hall and special “demo rooms” where companies could present their products and answer questions.

To find a list and description of all the sessions in all the tracks including links to the slide decks for many of the presentations, click here. You’ll be quickly impressed by the range and richness of the content. A smart phone app guided participants to all the sessions and enabled them to evaluate each presentation.

This year’s keynote speaker, sponsored by Genworth, was Anat Baron, former head of Mike's Hard Lemonade, a change strategist and “disruptor.” Her bio calls her a “force of nature” and states “she spent her illustrious career moving at warp speed while shaping and defining the trends that form today's business world.” She turned around Mike’s Hard Lemonade by aiming its marketing at women who wanted something to drink out of a bottle while guys were quaffing beer. Her message to the LTCI industry? “Disrupt or Die: Reinvention in an Ever Changing World.” We live in a time of huge and rapid change. Facebook, Twitter, Skype, the Cloud, etc., are barely a decade old. Yet they’ve changed the world and how we survive, prosper or not in it. Social networking rules. Master it or expect failure and embarrassment (such as being identified in the audience as a flip-phone user or a non-texter.) Ms. Baron’s session was entertaining and interesting, but would have benefited from more effort on her part to apply her observations and analysis to the LTC insurance business and its challenges.

The first break-out session I attended was “Addressing Long-Term Care Around the World,” on the Actuarial and Finance track, with presenters Sam Gutterman, retired consulting actuary; Andrew Dalton, Milliman; and moderator Robert Eaton, also Milliman. Two key contributors to the Population Issues Working Group of the International Actuarial Association discussed the group's recent long-term care study. The study covered LTC delivery, experience, trends, and financing from around the globe. This session summarized the study’s findings and reviewed the LTC systems in several countries. Review the presenters’ slide decks here for all the details. In a nutshell, we’re not alone; the rest of the world is struggling with the same demographic challenges as the USA, including the age wave and the birth dearth.

Next came the perennial favorite ILTCI conference session “Who Buys LTC Insurance?... Why? (or Why Not)?” with the latest findings and reflections from 25 years of quinquennial analyses of the subject. Presenters Marc Cohen, Clinical Professor of Gerontology, University of Massachusetts; Susan Coronel, Executive Director, Product Policy, America's Health Insurance Plans; and Eileen Tell, Independent Consultant, ET Consulting, LLC recounted and opined about “changes in the LTC insurance market from the consumer perspective, and an empirical basis for projecting future trends.” Check out their slides here. Some highlights: Average age of purchase has leveled off at 60, down from 68. Buyers are using a smaller percentage of their income to purchase LTCI. Most important reason people buy? Consistently, to protect assets and estates. Financial planners surpassed agents as most influential in the purchase decision. But for choice of carrier, agents are most important. Cost is the main reason not to buy. Conclusions: educate and motivate people about LTC risks, costs and planning options; address concerns with premium costs; policy discussions and research on expanding the private market are relevant and necessary; critical role remains for public sector/government.

The next session I attended was “Washington State Initiative,” produced by Eileen Tell, with presenters Chris Giese, Principal and Consulting Actuary, Milliman; Pete Subkoviak, Senior Health Care Campaign Coordinator, SEIU 775; and John Wilkin, Senior Actuary, Actuarial Research Corporation. “The state of Washington is exploring the financial feasibility of a publicly financed LTC option, along with the feasibility of a public sector role in reinsurance risk pooling to support the private market.” Check out the presenters’ slides here. The basic idea is to charge a mandatory .49% extra payroll tax to fund a one-year front-end benefit of $100 per day, $36,500 maximum. The hope is to get people paying for LTC risk before they need care and to relieve Medicaid. I asked two questions. Did they analyze the economic impact of diverting so much money from the productive economy, i.e., savings and investment capital, into more government spending? Answer: No. Do they have any evidence of catastrophic long-term care spend down? Answer: only anecdotes, no empirical evidence. Conclusion: This is CLASS-lite, going nowhere.

Day 2 of the conference began for me in a session titled “Finding LTSS: New Options or New Confusions for Consumers Alternative Solutions.” This was a report on ASPE (US Department of Health and Human Services Assistant Secretary for Planning and Evaluation) focus groups and environment study of both public and private sector online resources that help people find LTC. Eileen Tell was the producer and a speaker joined by Anne Tumlinson of Anne Tumlinson Innovations, LLC. America’s system to connect people with needed LTC services is a mess. Families get no information or training. There is no hub to go to for home care; no entry point. Organizations are trying to come up with answers, but nothing is working. There is an opportunity to delay formal care use by simplifying and expediting access to home care. But need does not equal demand. Entrepreneurs and investors get frustrated and give up. See presenters’ slides here.
LTC Comment: What this session lacked was any comprehension or acknowledgement that government itself, the proposed solution, caused the dysfunction in the home care market in the first place. Medicaid made nursing home care virtually free in 1965, which relieved the public of LTC risk and cost and impeded development of a private market for home care as it simultaneously crowded out LTC insurance and home equity conversion to help pay for it. For home care access and funding, government has been and continues to be the problem, not the solution.

The morning of day two continued with “A Public Private Partnership: Catastrophic Public and Front-End Private LTC Insurance,” produced by Eileen Tell, with speakers Marc Cohen; Anne Tumlinson; and Gretchen Alkema, Vice President, Policy and Communications, The SCAN Foundation. Most of this session was Marc Cohen’s presentation of research he expects to publish with pro-public-funding, anti-LTCI analysts Judy Feder (Georgetown University) and Melissa Favreault (Urban Institute). After recounting dysfunctions in the LTC financing marketplace, specifically too little insurance for an eminently insurable risk, Marc turned to the argument in favor of a compulsory, backend, government-financed LTC insurance covering the catastrophic risk. We’ll have to wait for his forthcoming article to see the details, because listening to this presentation was like drinking from a fire hose and the detailed slides are embargoed until the article is accepted for publication. But one interesting new idea proposed is to soften the mandatory nature of this approach with an opportunity for people to opt out of the program. That keeps a semblance of voluntary choice while strongly nudging people toward participation.
LTC Comment: The basic flaw in this plan is that it ignores the role of Medicaid, long-term care financing’s elephant in the room. Marc characterized access to Medicaid LTC benefits as available only to people who spend down for care or hide assets. The much bigger problem is that most middle class and some affluent people qualify for Medicaid benefits without doing either, because of the program’s generous resource exemptions for home equity, IRAs, autos, term life insurance, prepaid burials, personal belongings, home furnishings, etc. As long as most people can ignore LTC risk, avoid premiums for private LTCI (or opt out of a semi-mandatory government program), wait to see if they ever need care and rely on Medicaid while preserving most of their wealth when they do, little will change. Brilliant work, Marc, but it’s all for naught unless and until you deal with Medicaid’s actual impact instead of depending on the myth of Medicaid spend down.

The next session I attended was “LTC Think Tank Innovations-Exploring Possibilities for Improving LTC Financing.” John O'Leary, president, O'Leary Marketing Associates; Vincent Bodnar, Chief Actuary, LTCG; and Eileen Tell presented. This session explored the 80 ideas, 15 key concepts and three main platforms or tracks generated by the multi-year “Long-Term Care Think Tank” project sponsored by the Society of Actuaries. Review their final report published a year ago here or read our analysis of it in LTC Bullet: Fuel for LTC Change. There is too much to say about this brilliantly conceived, masterfully executed project to cover it here, so I strongly urge readers to go to the source (above) and the presentation slides here to learn more. But just to give you the flavor, consider these five finalist concepts generated by the Think Tank:

Flex 401K: multipurpose savings to include long-term care
Family LTC Account: cover multiple family members in a single LTCI policy
Health Care Look Alike: A LTCI policy that looks like a health insurance policy
Health and LTSS Combination: Add LTC to Medigap and Medicare Advantage
Medicare LTC Benefit: Medicare LTC for all

All of these ideas are worth pursuing except the last which I’ve compared elsewhere to adding deck chairs to the Titanic after the incident with the iceberg.

The main conference program wrapped up with a provocative general session called “New President and Congress: Implications for Aging and LTC Finance,” produced by John O’Leary and Eileen Tell. Slides here. The program described it thus: “After a roller coaster year of debates and campaigning, we now face dramatic changes in the political landscape for 2017 and beyond. This session brings together some of the nation's leading political and policy experts to discuss the new President and Congress and the implications with respect to private financing, public programs and new initiatives for long term care.” Presenters were:

Bob Blancato President, Matz, Blancato, & Associates
Erik C. Komendant, Head of Federal Affairs and Public Affairs, America's Health Insurance Plans
Katherine Hayes, Director of Health Policy, Bipartisan Policy Center
Karen Smyth, President, Omnia Professional Services

Response Panel:

Rod Perkins Vice President of Insurance Regulation, American Council of Life Insurers (ACLI)
James Glickman, President and CEO, Lifecare Assurance Company
Paul Forte, CEO, Long-Term Care Partners
Anne Tumlinson, Founder, Anne Tumlinson Innovations, LLC Moderator

Overview:

Blancato summarized key issues and who’s who in the Trump Administration and the new Republican-dominated Congress affecting health and long-term care policy. Scroll down to a summary here.
Komendant opined about what happened the week before with the collapse of Republicans’ ObamaCare repeal and replace bill. R governors pushed back against the American Health Care Act. It’s dead, move on.
Hayes wasn’t so sure, predicting the House would revisit repeal and replace this year, including Medicaid block grants, perhaps in budget negotiations. Restructure savings so they come five years out, i.e., beyond the next election, and R governors won’t care.
Blancato: Medicaid is bigger than Medicare now.

Much more give and take followed, but this was the essence I took away. The Trump win blew away predictability. Rs have to abolish ObamaCare or at least reform it and call the change “repeal and replace.” Whether handled in health reform or budget negotiations, Medicaid is too big to ignore.

This program was supposed to conclude with the audience voting via their smart phones on a poll of key questions about the current political state of affairs affecting long-term care. Unfortunately, the session ended before the questions were fully presented and the audience invited to respond. You can read the questions and the answer options in this slide, mostly at its end.

But the conference didn’t end there. Yet another reception and a “Game Night” followed. Next morning, a Predictive Modeling Workshop on the Actuarial & Finance Track began. As Joe Wurzburger, Staff Fellow, Health, Society of Actuaries explained it to me: “Predictive modeling is a method for utilizing massive quantities of data and advanced computing power to forecast outcomes. For long-term care insurance, it can be used for many purposes, including determining pricing assumptions, predicting claim utilization, or modeling certain policyholder behaviors.” The full-day session, consisting of hands-on exercises and presentations of big picture concepts, was sponsored by the Society of Actuary’s LTC Section and featured these presenters: Missy Gordon, Principal and Consulting Actuary, Milliman; James Berger, Economic Capital Actuary, Employers Reassurance Corporation; Joe Long, Assistant Actuary and Data Scientist, Milliman; and John Murdzek, Senior Experience Studies Actuary, Genworth.

See what you missed this year? Mark your calendars now: The 18th Annual ILTCI Conference will be held March 18 to 21, 2018 at the Paris Las Vegas with room rates of only $99. Details this summer at www.iltciconf.org. Anyone interested in exhibiting, who has not exhibited at the conference before, should let conference organizers know, so that they will receive the invitation in time to get the deeply discounted early bird rates.

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Updated, Monday, April 3, 2017, 9:40 AM (Pacific)

Seattle—

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LTC E-ALERT #17-012: LTC NEWS AND COMMENT

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:

Policyholders in Limbo After Rare Failure of Insurer
Reverse mortgages have an image problem
No need to trash this emerging senior living option
Awareness of Home Equity Products
U.S. Nursing Homes Struggle in Ever-Tougher Market
The GOP Entitlement Caucus
NIC-funded study will examine demand for middle-market seniors housing
Local police departments restore peace of mind by phoning senior citizens once a day
Study Connects Genes to Late Onset Alzheimer’s in African-Americans
House GOP's Medicaid Plan Will Mean More Flexibility, Less Money, And Worse Care For Seniors
Is 90 the New 80? Most 90-Somethings Feel Healthy
CMS postpones expansion, implementation of bundled payment programs
Staring Down Alzheimer’s
Minimum-Wage Hikes Could Deepen Shortage Of Health Aides

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Updated, Monday, March 20, 2017, 9:42 AM (Pacific)

Seattle—

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LTC E-ALERT #17-011: LTC NEWS AND COMMENT

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:

Medicaid is out of control. Here’s how to fix it.
Warnings About Medicare's future continue to be ignored
In This Next Phase Of Health Reform, We Cannot Overlook Long Term Care
Falls Are Taking A Huge And Rising Toll On Elderly Brains
SNF occupancy down despite 'significant' flu season and Medicaid admissions up, report shows
Subject: Profile of Older Americans: 2016
Sleeper issue of Medicaid’s future could prove health-care plans’ stumbling block
Senate confirms Seema Verma as CMS administrator
Never before seen images of early stage Alzheimer's disease
The Rhode Island Model Can Save Medicaid
5 peeks at the long-term care insurer failure business
White Paper: University Based Retirement Communities

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Updated, Friday, March 17, 2017, 9:50 AM (Pacific)

Seattle—

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LTC BULLET: MEDICAID PLANNING HITS A NEW LOW

LTC Comment: You may wonder why the public remains in denial about LTC when the risks and costs are so great. Maybe this will answer that conundrum, after the ***news.***

*** NO LTC BULLET NEXT WEEK. Damon and I depart for the 17^th Annual Intercompany Long-Term Care Insurance conference in Jacksonville, Florida. We’ll provide our usual “LTC Embed Report from the LTC Policy Front” after the conference concludes on March 29. We hope to see you there. ***

LTC BULLET: MEDICAID PLANNING HITS A NEW LOW

Thanks to long-time Center member and friend Tom Hebrank of Advanced Planning Solutions for bringing this matter to our attention.

What follows is another shenanigan by Medicaid planner Roccy DeFrancesco. Recognize the name and the MO? We covered him and his tawdry methods in LTC Bullet: Freddy Krueger and Medicaid Planning, Wednesday, October 28, 2009.

He’s at it again. This time his goal is to derail U.S. House Bill 181. What is that bill’s purpose? It would prevent wealthy couples, like the Medicaid planners’ clients, from hiding unlimited assets in Medicaid-friendly annuities while qualifying immediately for the welfare program’s long-term care benefits. But H.R. 181 only goes half way. It still allows such couples to shelter 50% of the income from these annuities whose purpose is to disappear large assets. Nevertheless, it is a step in the right direction.

For background, have a look at our earlier coverage of the Medicaid-friendly annuity loophole:
LTC Bullet: Annuity Blues, November 13, 2013; LTC Bullet: Medicaid Planning—The Rest of the Story, Friday, February 7, 2014; LTC Bullet: How to End Medicaid Annuity Abuse, Friday, February 28, 2014; LTC Bullet: Medically Underwritten Annuities for LTC, Friday, May 15, 2015; LTC Bullet: Medicaid Annuity Abuse: A Case Study, Friday, June 5, 2015; LTC Bullet: LTC Annuities: To Get or Avoid Medicaid?, Friday, June 19, 2015.

Now, what does Roccy DeFrancesco have to say about protecting these abusive annuities. The following quotes are drawn from an email he sent to his Medicaid-planner subscriber base on March 9, 2017. Our comments follow each quote.

Roccy: “The Certified Medicaid Planner governing board has launched a ‘Stop H.R. 181: Protect Community Spouse’ advocacy effort.”

LTC Comment: Anyone who cares about Medicaid’s ability to protect the poor, and certainly anyone in favor of early and responsible long-term care planning, should support H.R. 181 even more aggressively than the Medicaid planners oppose it.

Roccy: “Medicaid laws are implemented prospectively. This law will likely affect only those annuities purchased after the effective date of the law if it is ever passed. If your clients are a good candidate for a Medicaid annuity, now would be the good time to consider the purchase. Our Medicaid planning team can help you with this.”

LTC Comment: So this appeal is really just advertising for his services. Medicaid laws are not always implemented prospectively. When Congress clamped down on “Medicaid qualifying trusts” in the Omnibus Budget Reconciliation Act of 1985, it did so retroactively. Many Medicaid planners and their clients got caught with big trust assets that no longer qualified as exempt resources. The same thing could—and should—happen with Medicaid-qualifying annuities. The last thing aging Americans should do is to heed this advisor’s urging to stand in front of the oncoming legislative train.

Roccy: “A recent bill proposed by Oklahoma Representative Mark Mullin seeks to put some limits on the over-use of annuities in Medicaid planning. Ever since the passage of OBRA '93 and the resulting HCFA Transmittal 64, excess resources have been allowed to be converted into a narrowly prescribed single premium immediate annuity (SPIA).”

LTC Comment: What he doesn’t tell you is that Congress tried to end the abuse of such annuities in the Deficit Reduction Act of 2005, but failed, accidentally opening the way for abuse of the newly conceived Medicaid-friendly annuities that H.R. 181 is intended to curtail.

Roccy: “The bill's primary purpose is to close the so-called annuity loophole which allows for annuitization by the community spouse of unlimited excess resources in order to qualify the intuitional [sic, should be “institutional”] spouse for nursing homes. In 48 states, the community spouse can have an unlimited income and does not need to support the intuitional [sic] spouse's monthly care costs once the couple has spent down assets below the community spouse resource allowance.”

LTC Comment: Well, that’s a pretty clear confession that the real goal here is to shift Medicaid resources from their intended recipients—the needy—to the Medicaid planners’ wealthy clients. Ya think this might have a dampening effect on demand for long-term care insurance? Let’s see. Pay LTCI premiums for decades and maybe never need long-term care vs. preserve your wealth and get LTC for free if you ever need it. That’s a tough one all right.

Roccy: “Because the purchase of the annuity is part of the federal safe harbor rules that exempt the purchase from transfer penalties, the purchase of large annuities with short durations has caught the attention of members of Congress who seek to impose some limits. The bill would treat one-half of the annuity income received by the community spouse's annuity as available to contribute towards the cost of care of the institutional spouse.”

LTC Comment: Safe harbor? What nonsense. Medicaid is a means-tested public assistance program. Many Congresses and Presidents have tried for decades to protect it from Medicaid-planning abuses and abusers. Medicaid has certain asset exemptions and spousal impoverishment protections to ensure no one in real need is ever excluded. The program was never intended to protect unlimited income and assets.

Roccy: “While this would not be the end of using immediate annuities to assist with Medicaid planning, it would curtail those with high net worth from using annuities altogether or from using annuities with a short duration.”

LTC Comment: Gee, we sure wouldn’t want to discourage his high-net-worth clients from getting Medicaid to pay for their long-term care, right? One of the reasons the Center for Long-Term Care Reform has had considerable success combatting Medicaid planners over the years is that they have often been careless about disclosing their true intent. This is a prime example.

And that should be enough to give you the sense of what this man and his ilk are all about.

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Updated, Monday, March 13, 2017, 10:55 AM (Pacific)

Seattle—

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LTC E-ALERT #17-010: LTC NEWS AND COMMENT

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:

Long-term care insurance may become mandatory
The LTC industry should be ashamed
Led by Baby Boomers, divorce rates climb for America’s 50+ population
U.S. Household Net Worth Reaches Record $92.8 Trillion
A Playbook For Managing Problems In The Last Chapter Of Your Life
The House GOP Health Plan Would Be The Biggest Change For Seniors In A Half-Century
The Affordable Care Act, Medicaid And Divorce
Study: Caffeine may protect against dementia
Over 80 'Wellderly' Research Reveals Some Unexpected Twists
New OIG Medicaid fraud data, map shows nearly $1.9 billion in recoveries
Americans’ Position on Retirement Planning: The Shruggie
Costs Exploding For Alzheimer's And Other Dementias
Tom Price says Medicare should remain 'guarantee'
‘Radical’ Medicaid changes could lead to LTC service cuts, LeadingAge and 99 other advocacy groups warn

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Updated, Friday, March 10, 2017, 9:28 AM (Pacific)

Seattle—

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LTC BULLET: LTC ALMANAC UPDATE

LTC Comment: We’ve updated the “Almanac of Long-Term Care” in The Zone. More on the LTC Almanac and today’s update after the ***news.***

*** AGING: CONCEPTS AND CONTROVERSIES, 9^thedition: For over 25 years Harry R. “Rick” Moody’s and Jennifer R. Sasser’s textbook on aging has introduced college students to the pros and cons of a broad range of age-related issues. The style is debate. Whether you agree or disagree with each author’s position on any topic, you get the best arguments from both perspectives. Steve Moses’s 1990 Gerontologist article titled “The Fallacy of Impoverishment” was in earlier editions of the book. The new, 9^th edition contains a slightly abridged version of Steve’s 2005 Cato piece titled “Aging America’s Achilles’ Heel: Medicaid Long-Term Care.” Textbooks don’t come cheap; this one costs $118. But if you’re looking for a single book to introduce new hires or seasoned staff to the sensitive controversies of the aging field, you couldn’t do better than this one. ***

LTC BULLET: LTC ALMANAC UPDATE

LTC Comment: Center members know and appreciate our "Almanac of Long-Term Care" in The Zone, our password-protected website.

*** SPECIAL: We are making access to The Zone, including the "Almanac of Long-Term Care," free for two weeks—today through Friday, March 24, 2017. To access this introductory peek into The Zone, go to http://www.centerltc.com/members/index.htm and use the following case-sensitive user name and password: UN: IntrotoZone / PW: FreeTrial. Like what you see? Then join the Center for Long-Term Care Reform here. Or contact Damon at 206-283-7036 or damon@centerltc.com. ***

The LTC Almanac is divided into 11 sections:

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

Each section is divided into sub-sections and under each sub-section we provide a list by date of the most important reports and articles published on the topic, usually with a few highlights and sometimes with analysis.

The Almanac of Long-Term Care is a great way to find statistics you need quickly or to get current on topics you need to know the latest information about.

The Zone and the LTC Almanac are for Center for Long-Term Care Reform members only, except during the current free trial offer. Join the Center here: http://www.centerltc.com/support/index.htm. Call or email Damon at 206-283-7036 or damon@centerltc.com. He can give you a user name and password to open up The Zone even before your dues payment arrives. Individual annual memberships are $150. Premium memberships with access to our “Clipping Service” start at $250. Premium Elite and “Regional Representative” membership (if you qualify professionally) are $500. Corporate memberships with many extra benefits start at $1,000. See our "Membership Levels and Benefits" schedule here.

Caveat: With time, some hyperlinks go bad. In a huge document like the "LTC Almanac," we can't keep all the links current all the time. If you find a bad link, but want to get to the material, contact us. We often have an electronic copy of the document and we can usually find a current live link. We'll also fix the link in the LTC Almanac so it will be current again for others.

Suggestion: Read through the following update to stay current on new resource materials. Then browse the full LTC Almanac at your leisure. When you need a quick fact or the latest research on a particular topic, you'll know right where to go. Enjoy.

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Chapter 1: Aging Demographics

United States

General Stats

Older Americans 2016 Key Indicators of Well-Being, Federal Interagency Forum on Aging-Related Statistics, August 2016: http://www.agingstats.gov/docs/LatestReport/OA2016.pdf

8/16/2016, “7 new, free LTC marketing graphics,” by Allison Bell, LifeHealthPRO

Quote: “The Federal Interagency Forum on Aging-Related Statistics, a body based at the Administration for Community Living at the U.S. Department of Health and Human Services, recently published a public-domain report of interest to any financial professional involved in retirement planning, including planning for post-retirement acute care and long-term care costs. Earlier this month, the forum published "Older Americans 2016: Key Indicators of Well-Being," a 179-page collection of aging statistics from 16 federal agencies. The report includes information on the size of the older population, aging-related behavior, and aging-related health risks and health care services.”

LTC Comment: Just about every imaginable chart and statistic on aging Americans.

Housing Report 1216 LINK:

12/14/2016, “Harvard study: Elderly demographics will crush existing housing and service options,” by John O’Connor, McKnight's Senior Living

Quote: “The nation's surging elderly population will create unprecedented demand for affordable housing and service options within two decades, a Harvard University study asserts. In fact, rising needs will far outstrip current capacity on both fronts, according to ‘Projections and Implications for Housing a Growing Population: Older Adults 2015-2035.’”

LTC Comment: A big problem and getting worse every day, but as usual, this report recommends only more government spending. Read its executive summary here.

Retirement Planning

Greenwald Survey on Retirement 0217 LINK:

3/1/2017, “Dems, Republicans All Worrying About Economic Security in Retirement,” Advisor Magazine

Quote: “A new report finds that 76 percent of Americans are concerned about their ability to achieve a secure retirement, with that level of worry at 78 percent for Democrats and 76 percent for Republicans. Some 88 percent of Americans agree that the nation faces a retirement crisis, and the concern is high across party lines. . . . Download the full study here.”

LTC Comment: Well, at least there’s something on which we can almost all agree. Unfortunately, this is one topic President Trump did not touch on in his remarks to Congress last night.

Chapter 3: Unfunded Liabilities--Social Security, Medicare, Pensions and Budgets

National Health Expenditures

NHE 2016-2025 Projections LINK:

2/18/2017, “National Health Expenditure Projections, 2016–25: Price Increases, Aging Push Sector To 20 Percent Of Economy,” by Sean P. Keehan, Devin A. Stone, John A. Poisal, Gigi A. Cuckler, Andrea M. Sisko, Sheila D. Smith, Andrew J. Madison, Christian J. Wolfe, and Joseph M. Lizonitz, Health Affairs

Quote: “ABSTRACT Under current law, national health expenditures are projected to grow at an average annual rate of 5.6 percent for 2016–25 and represent 19.9 percent of gross domestic product by 2025. For 2016, national health expenditure growth is anticipated to have slowed 1.1 percentage points to 4.8 percent, as a result of slower Medicaid and prescription drug spending growth. For the rest of the projection period, faster projected growth in medical prices is partly offset by slower projected growth in the use and intensity of medical goods and services, relative to that observed in 2014–16 associated with the Affordable Care Act coverage expansions. The insured share of the population is projected to increase from 90.9 percent in 2015 to 91.5 percent by 2025.”

LTC Comment: More “rosy scenario” from CMS actuaries. They say “national health expenditures (NHE) is projected to average 5.6 percent, outpacing average growth in gross domestic product (GDP) by 1.2 percentage points.” So GDP growth will be 4.4% annually for the next decade? Dream on.

Health Affairs NHE through 2025 LINK:

7/13/2016, “National Health Expenditure Projections, 2015–25: Economy, Prices, And Aging Expected To Shape Spending And Enrollment,” by Sean P. Keehan, et al. , Health Affairs

Quote: “New estimates released today from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) project an average rate of national health spending growth of 5.8 percent for 2015–25, exceeding the expected average growth in gross domestic product (GDP) by 1.3 percentage points per year. As a result, the health share of the economy is projected to be 20.1 percent at the end of this period, up from 17.5 percent in 2014. The study also finds that the percentage of the US population that is uninsured is expected to be 8 percent in 2025, down from about 11 percent in 2014.”

LTC Comment: Rosy scenarios like this are a real disservice. No one knowledgeable expects GDP growth to be 4.5% (5.8% minus 1.3%) over the coming decade. Besides, the next 10 years are nearly irrelevant. What matters is what happens in 2031 when the boomers start turning 85, LTC costs explode, and the Social Security and Medicare trust funds have disappeared.

National Health Spending, 2015 LINK:

12/5/2016, “National Health Spending: Faster Growth In 2015 As Coverage Expands And Utilization Increases,” by Anne B. Martin, Micah Hartman, Benjamin Washington, Aaron Catlin, and the National Health Expenditure Accounts Team, Health Affairs

Quote: “Total nominal US health care spending increased 5.8 percent and reached $3.2 trillion in 2015. On a per person basis, spending on health care increased 5.0 percent, reaching $9,990. The share of gross domestic product devoted to health care spending was 17.8 percent in 2015, up from 17.4 percent in 2014. . . . Slightly offsetting the slowdown in Medicare hospital and prescription drug spending growth was faster growth in Medicare spending for nursing home care (which increased 5.6 percent in 2015, compared to growth of 2.5 percent in 2014) and home health care (which increased 2.6 percent in 2015 after growth of 1.7 percent in 2014). . . . Medicaid spending continued to grow at a strong rate of 9.7 percent in 2015, following growth of 11.6 percent in 2014 . . ..”

LTC Comment: Relentless growth in health care expenditures (and the government’s role in paying for them) continues to exceed growth in the GDP, a deadly downward economic spiral over time.

CBO on Unfunded Liabilities

CBO “The 2016 Long-Term Budget Outlook” 0716 URL: https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51580-LTBO.pdf

This is the annual dismal federal budget outlook from the Congressional Budget Office. Read it and weep.

GAO on Unfunded Liabilities

GAO on US Fiscal Health 0117 URL: http://www.gao.gov/assets/690/682131.pdf

1/17/2017, “The Nation's Fiscal Health: Action is Needed to Address the Federal Government's Fiscal Future,” by Government Accountability Office (GAO)

Quote: “Federal spending continues to outpace revenue—by $587 billion in 2016—and, absent policy changes, the structural gap between revenues and spending puts the federal government on an unsustainable long-term fiscal path. Federal policymakers face economic, security, and social challenges requiring difficult policy choices, but a long-term fiscal plan is also needed to preserve flexibility to address unforeseen events.”

LTC Comment: “(GAO) today issued its first annual outlook on the nation’s fiscal future.” Well, it’s about time!

Unfunded Liability Estimates

AEI on Entitlements 2016: “Increasing the Effectiveness and Sustainability of the Nation’s Entitlement Programs,” by Andrew Biggs, James c. Capretta, Robert Doar, Ron Haskins, and Yuval Levin, June 2016; http://www.aei.org/wp-content/uploads/2016/06/Increasing-the-Effectiveness.pdf

Shows difference between federal expenditures in 1965 and 2015. Makes the point that interest on the federal debt is less now on much greater debt than it was on much smaller debt in 1965 because the Federal Reserve artificially forced interest rates down.

Chapter 4: Long-Term Care

Home and Community-Based Services

GAO on HCBS Monitoring 0117 URL: http://www.gao.gov/assets/690/681213.pdf

1/3/2017, “CMS should improve oversight of HCBS, GAO says,” by Lois A. Bowers, McKnight's Senior Living

Quote: “The Centers for Medicare & Medicaid Services should standardize federal requirements for programs providing personal care services for Medicaid beneficiaries, including residents of assisted living communities, to protect beneficiaries from care-related harm and ensure that billed services are provided, the Government Accountability Office said in a new report publicly released Dec. 22.”

LTC Comment: The practical challenges we’ve predicted would bedevil the program as Medicaid moves from mostly institutional LTC to mostly home and community-based care are on the upswing. Maintaining care quality and reimbursement accuracy is much more difficult when dealing with individual recipients in their own homes than dealing with nursing homes into which teams of care reviewers and accountants can be sent to ensure standards or care and payment are met or exceeded.

Chapter 5: Caregiving

General

Caregiving-RiB 0916 LINK:

9/13/2016, “Families Caring for an Aging America,” National Academies of Sciences, Engineering, and Medicine

Quote: “At least 17.7 million individuals in the United States are providing care and support to an older parent, spouse, friend, or neighbor who needs help because of a limitation in their physical, mental, or cognitive functioning. The circumstances of individual caregivers are extremely varied. They may live with, nearby, or far away from the person receiving care. The care they provide may be episodic, daily, occasional, or of short or long duration. The caregiver may help with household tasks or self-care activities, such as getting in and out of bed, bathing, dressing, eating, or toileting, or may provide complex medical care tasks, such as managing medications and giving injections. The older adult may have dementia and require a caregiver’s constant supervision. Or, the caregiver may be responsible for all of these activities. With support from 15 sponsors, the National Academies of Sciences, Engineering, and Medicine convened an expert committee to examine what is known about the nation’s family caregivers of older adults and to recommend policies to address their needs and help to minimize the barriers they encounter in acting on behalf of an older adult. The resulting report, Families Caring for an Aging America, provides an overview of the prevalence and nature of family caregiving of older adults as well as its personal impact on caregivers’ health, economic security, and overall well-being. The report also examines the available evidence on the effectiveness of programs and interventions designed to support family caregivers. It concludes with recommendations for developing a national strategy to effectively engage and support them.”

LTC Comment: Yet another long and expensive study and report on the problem of long-term caregiving with lots of expensive recommendations and no clue how to pay for them.

Chapter 6: Long-Term Care Financing

Who Will Pay for LTC? (includes "Not the VA")

Warshawsky on LTC 0217 URL: https://www.mercatus.org/system/files/mercatus-warshawsky-marchand-ltss-v2.pdf “Improving the System of Financing Long-Term Services and Supports for Older Americans,” by Mark J. Warshawsky and Ross A. Marchand, Mercatus Working Paper, January 2017

We analyzed this report in LTC Bullet: The LTC Wars (shawsky), Friday, February 24, 2017; LTC Comment: The self-styled conservative LTC Commission co-chair has declared war on government-financed long-term care proposing private sector solutions that mirror our own. Details follow.

See also this on another Warshawsky publication: 2/15/2017, “The Urban Institute Model Of Financing Long-Term Services And Supports: A Critical Review,” by Mark Warshawsky, Health Affairs Blog

Quote: “Scoring in the LTSS area needs to be based on widely accepted facts (i.e., a fair reading of the literature and/or settled empirical findings), completely transparent (with all major assumptions disclosed and justified), and robust (to consider all types of policy interventions). Scoring should also be alternatively illustrated by conservative results and assumptions, to give a sense of the possible range of outcomes. Unfortunately, despite the great apparent effort of the Urban Institute, their model, as presently constituted, cannot serve this purpose.”

LTC Comment: This is a devastating refutation of the data and reasoning employed by advocates of a new, compulsory, payroll-financed government LTC program. See our earlier critique of the same work in “LTC Bullet: LTC at a Crossroads,” Friday, June 3, 2016.

Chapter 7: Long-Term Care Insurance

Why Don’t More People Buy LTCI?

LifePlans Buyers Non-Buyers 0117 URL: https://www.ahip.org/wp-bcontent/uploads/2017/01/LifePlans_LTC_2016_1.5.17.pdf

1/10/2017, “Don’t Underestimate the Value of Long-Term Care Insurance,” by Alicia Caramencio, AHIP

Quote: “Many people underestimate their likelihood of needing need long-term care (LTC) and how much that care will cost. People have a 50 percent chance of needing LTC at some point in life, and about 30 percent of people who do may need care for five years or more, according to a new study by LifePlans, Inc. on behalf of America’s Health Insurance Plans (AHIP). . . . Read the full report to understand the long-term care (LTC) insurance marketplace from the consumer’s point of view.”

LTC Comment: This is the latest version of LifePlans’ periodic report on “Who Buys Long-Term Care Insurance? Twenty-Five Years of Study of Buyers and Non-Buyers in 2015–2016.” We’ll review and comment on its key findings in an LTC Bullet soon.

UI on LTCI 0816 URL: http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000881-Who-Is-Covered-by-Private-Long-Term-Care-Insurance.pdf

8/18/2016, “Who Owns Long-Term Care Insurance?,” by Howard Gleckman, Forbes

Quote: “Overall, the share of older adults who own long-term care insurance (LTCi) has barely changed since 2002, according to new research by my Urban Institute colleague Rich Johnson. In 2002, about 10 percent of those 65 and older had coverage. By 2008 that share had ticked up to 12 percent, but in 2014, it dropped back to 11 percent. Among those aged 55-60, the share of policyholders slipped from 7 percent in 2002 and 2008 to just 5 percent in 2014.”

LTC Comment: Interesting numbers, but this author and his source remain clueless about the cause. No mention of the real reasons why LTCI has lagged, i.e. Medicaid crowd out of demand and Federal Reserve interest-rate crowd out of profits.

Chapter 10: Medicaid

Medicaid Financing and Burwell Data

Burwell on LTC 2014: “Medicaid Expenditures for Long-Term Services and Supports (LTSS) in FY 2014: Managed LTSS Reached 15 Percent of LTSS Spending,” April 15, 2016; https://www.medicaid.gov/medicaid-chip-program-information/by-topics/long-term-services-and-supports/downloads/ltss-expenditures-2014.pdf
This is the best data available.

Dual Eligibles

MedPAC Data Book on Duals 0117 LINK:

“Beneficiaries Dually Eligible for Medicare and Medicaid,” a data book jointly produced by the Medicare Payment Advisory Commission and the Medicaid and CHIP Payment and Access Commission, January 2017.

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Updated, Monday, March 6, 2017, 9:28 AM (Pacific)

Seattle—

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LTC E-ALERT #17-009: LTC NEWS AND COMMENT

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:

OneAmerica bets big on long-term-care market
House Committee Aims to Reshape Medicaid Program
Trump's long-term care cabinet
New York regulators look over Genworth buyer
Insurance Commissioner Announces Court Approval of Liquidation of Penn Treaty and American Network Insurance Companies; Assures Policyholders Claims Will Be Paid by State Guaranty Funds Pursuant to State Law
10 counties where Medicare Advantage looks like a wimp
Dems, Republicans All Worrying About Economic Security in Retirement
How Alzheimer’s Defined a Family
Most Long-Term Care Insurance Claims Are for Home Care
A Simple Guide to Planning for a Loved One's Long-Term Care
Hip Fracture's Link to Early Death May Last Years

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Updated, Friday, March 3, 2017, 10:52 AM (Pacific)

Seattle—

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LTC BULLET: MAKE LONG-TERM CARE GREAT AGAIN

LTC Comment: To borrow a phrase, what are the key components we must put in place to “make long-term care great again?” After the ***news.***

*** THE 17^TH ILTCI CONFERENCE convenes March 26-29 in Jacksonville, Florida. Organizers have announced availability of an online version of their mobile app if you want to look at session descriptions and speaker details. They ask attendees to choose their sessions immediately using a survey link to avoid standing room only crowds. Details here: http://www.iltciconf.org/. Hope to see you there. ***

*** LTC CLIPPING SERVICE: Do you spend a lot, maybe too much time scanning the media to keep up with professional news? Have we got a deal for you? Leave that to us. We’ll find, summarize, highlight and link any news story, report, study or journal article you really need to know and understand. We’ll email you a quick and concise notice like the one below. And we’ll field your questions if you need more information. It’s like having a world-class consultant at your fingertips. How can you get in on this opportunity? Contact Damon for details at 206-283-7036 or damon@centerltc.com. He’ll have you in the loop before you can say “the check is in the mail.”

3/1/2017, “Insurance Commissioner Announces Court Approval of Liquidation of Penn Treaty and American Network Insurance Companies; Assures Policyholders Claims Will Be Paid by State Guaranty Funds Pursuant to State Law,” Pennsylvania Pressroom

Quote: “Insurance Commissioner Teresa Miller today announced the Commonwealth Court approval of petitions to liquidate Penn Treaty Network America Insurance Company and American Network Insurance Company, with policyholder claims to be paid through the state guaranty association system, subject to statutory limits and conditions. . . . Commissioner Miller said the two companies have approximately 76,000 policyholders nationwide, with 9,000 residing in Pennsylvania. More than 98 percent of Penn Treaty and American Network’s policies are long term care insurance. . . . ‘Policyholder claims will continue to be covered by the state guaranty association system pursuant to law, and policy claims will be paid subject to the applicable state guaranty association coverage limit and conditions. Policyholders should continue to file claims as they have been in the past, and must continue to pay their premiums in order to be eligible for guaranty association coverage,’ Commissioner Miller said.”

LTC Comment: This long, sad saga is finally coming to an end.

LTC BULLET: MAKE LONG-TERM CARE GREAT AGAIN

The Problem

Providing long-term care for the chronically ill elderly places a huge financial and emotional strain on families. Despite a 70 percent probability of needing long-term care someday, most Americans do not plan for this risk and cost, have not purchased private insurance to allay it, and will most likely end up dependent on public assistance should they ever require expensive, extended care. The cost of formal nursing home or home care provided by Medicare and Medicaid already stresses the U.S. and state governments’ ability to pay. Out of pocket costs for long-term care have plummeted while public costs have skyrocketed over the past five decades.

Medicaid, a means-tested public assistance program, began funding nursing home care in 1966. Although intended as a safety net for the truly needy, Medicaid gradually became the dominant long-term care payer for the middle class and some of the affluent as well as the poor. By making nursing home care virtually free, Medicaid impaired a market for privately financed home care, crowded out the market for private long-term care insurance, and desensitized the public to long-term care risk and cost. Over 50 years later, Medicaid struggles with severe problems of access, quality, reimbursement, discrimination and institutional bias.

Historically, Social Security and Medicare have propped up Medicaid’s ability to fund long-term care. Medicaid recipients must contribute most of their Social Security income to offset Medicaid’s cost for their care. Medicare reimburses nursing homes and home care agencies generously enabling them to survive despite Medicaid reimbursements at less than the cost of the care. But this system is at risk. A perfect storm of demographic and economic conditions threatens to upend the country’s half-century-old long-term care financing system in the 2030s.

Social Security and Medicare both face unfunded liabilities of approximately $32 billion each. Their trust funds contain only IOUs for money the U.S. government has already spent. Both programs have begun drawing down these ledgers at the expense of the federal general funds budget. In the 2030s, both trust funds will be depleted causing each program to reduce benefits or increase taxes. The bigger worry is that precisely at this time, the year 2031, baby boomers begin turning 85, the age at which long-term care needs and costs spike upward. These forces conspire to end Medicaid’s ability to fund long-term care for most Americans.

The Solution

To avoid a catastrophic outcome for long-term care financing in the 2030s, the United States needs to eliminate the perverse public policy incentives that discourage Americans from planning for long-term care risks and costs. Specifically . . .

Congress should end or radically reduce Medicaid’s home equity exemption, which as of 2017 varies by state from $560,000 to $840,000 (only $29,200 in Britain). Reverse mortgages enable people to use their home equity to fund long-term home care privately with no payments required until they sell, die or move out. Making home equity liable for long-term care costs would pump desperately needed private funds into the service delivery system, relieve the strain of Medicaid expenditures on tax payers, and create a much stronger incentive for families to plan early and save, invest or insure for long-term care.

Congress should end egregious Medicaid planning techniques that enable people with substantial wealth to dodge the welfare program’s spend down requirements and qualify immediately for publicly financed care. The worst of these techniques are Medicaid-compliant annuities and spousal refusal which both routinely divert hundreds of thousands of dollars per use from private to public long-term care costs. Likewise, the Centers for Medicare and Medicaid Services (CMS) should enforce the statutory requirement that states recover care costs from the estates of deceased Medicaid recipients by reducing federal financial participation in cases of inadequate compliance.

The Government Accountability Office and/or the Inspector General of the U.S. Department of Health and Human Services should conduct a forensic audit of private long-term care financing potential. That audit should analyze the wealth possessed by a sample of aging Americans at least 20 years before they are likely to need long-term care. It should review real property ownership (County assessors’ office records) and transfers (County recorders’ office records) to determine where the wealth people own goes before they need long-term care. If the audit shows, as it undoubtedly will, that huge amounts of private resources disappear before they can be used to fund long-term care privately, then Congress should extend the transfer of assets look back period for Medicaid long-term care eligibility from the current five years to ten (as in Germany) or 20 years.

In the Center for Long-Term Care Reform’s many state- and federal-level studies and reports available at http://www.centerltc.com/reports.htm, the Center for Long-Term Care Reform has analyzed these problems, provided many examples, and explained these recommendations at much greater length.

Cost

Taking the necessary measures to correct the country’s long-term care financing problems does not require spending more public funds. Rather, the opposite. Excessive use of public funds to pay for long-term care is what caused these problems. The challenge is instead to target such Medicaid funds as are available to people genuinely in need and to stop spending scarce public welfare resources on people who should, could and would have paid for their own care if it were not for Medicaid’s near monopsony of long-term care financing.

One way to achieve that objective cost-effectively is under consideration in the U.S. Congress today. Replacing Medicaid’s unlimited federal financial participation matching system with capped block grants for each state would cut federal costs substantially. If combined with fewer regulatory strings attached, block grant funds would enable states to experiment with different ways to handle long-term care coverage and eligibility. With 50 states trying creative new approaches to target public financing of long-term care to the most needy, we would learn very quickly what works and what does not without waiting for Congress to agree and pass the kinds of measures recommended above.

Targeting public funds to people in genuine need, as Medicaid was originally intended to do, will save state and federal government funds. But it will also attract much greater private financing into the long-term care service delivery system. If people can no longer protect home equity from long-term care liability by relying on Medicaid after they already need care, that home equity—seniors’ largest asset by far—will boost long-term care access and quality for everyone, rich and poor alike. Once home equity is at risk for long-term care, more people and families will begin to take the risk of long-term care more seriously and earlier while they are still young enough and affluent enough to plan ahead. So private long-term care insurance will become a much more viable and popular product.

What’s New?

I first offered this analysis and made these recommendations in a 1988 report titled “Medicaid Estate Recoveries: National Program Inspection” for the Inspector General of the US Department of Health and Human Services. Most of my recommendations in that report, including longer and stronger transfer of assets restrictions and mandatory estate recovery, became law in the Omnibus Budget Reconciliation Act of 1993.

Likewise, the Center for Long-Term Care Reform’s published reports and extensive educational efforts among long-term care interest groups in the early 2000s, including our co-founder’s becoming Chief Health Counsel to the House Energy and Commerce Committee, led directly to further reforms in the Deficit Reduction Act of 2005 including the first-ever cap on Medicaid’s home equity exemption and the closing of additional eligibility loopholes.

Success is possible. We’ve proven that is true. All that’s needed is to finish the job. The Center for Long-Term Care Reform will continue fighting for federal and state measures that preserve Medicaid as a long-term care safety net for the poor and encourage everyone else to prepare early and adequately so they can pay privately for long-term care should the need ever arise.

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Updated, Monday, February 27, 2017, 9:55 AM (Pacific)

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LTC E-ALERT #17-008: LTC NEWS AND COMMENT

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 Damon at d206-283-7036 or damon@centerltc.com. Read testimonials by satisfied subscribers here. To subscribe online, please click here.

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:

Elder Care Gets an Upgrade
Prolonged Sleep May Be Early Warning Sign of Dementia
Lowest stroke rates in older baby boomers; younger people rising
Using IRAs to reduce Medicare premiums
New Report Shows that Medicare Advantage Payments Won’t Keep Pace With Costs in 2018
Survey: 75% of provider organizations offer a cost estimate upon request, yet less than 25% of patients request one
Rambling and long-winded? May be dementia, say scientists
Bad-mouthing the cost of long-term care
Managing Long-Term Care Spending Risks in Retirement
National Health Expenditure Projections, 2016–25: Price Increases, Aging Push Sector To 20 Percent Of Economy
New Solutions to Fund Your Retirement: Part 2 of 2
The Challenges of Funding Retirement and New Ways to Overcome Them: Part 1 of 2

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Updated, Friday, February 24, 2017, 10:52 AM (Pacific)

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LTC BULLET: THE LTC WARS (SHAWSKY)

LTC Comment: The self-styled conservative LTC Commission co-chair has declared war on government-financed long-term care proposing private sector solutions that mirror our own. Details follow.

LTC BULLET: THE LTC WARS (SHAWSKY)

LTC Comment: Mark Warshawsky co-chaired (with Bruce Chernoff of SCAN) the underfunded, short-lived and ultimately hapless Long-Term Care Commission, which was supposed to autopsy CLASS and replace it with something better. He has launched two ICBMs in a new assault on the latest government LTC financing takeover proposal.

We reported on the first missile last week in this “LTC Clipping”:

2/15/2017, “The Urban Institute Model of Financing Long-Term Services and Supports: A Critical Review,” by Mark Warshawsky, Health Affairs Blog

If the theoretical and evidentiary underpinnings supporting a new government LTC program are defective, what would be a better intellectual foundation for a different, more market-based approach? That’s what Warshawsky offers in missile #2, “Improving the System of Financing Long-Term Services and Supports for Older Americans,” a working paper authored with Ross Marchand for their employer, the Mercatus Center at George Mason University.

That paper was the subject of last Wednesday’s Long-Term Care Discussion Group meeting. You can retrieve Warshawsky’s slides for that presentation as well as the paper itself here. The LTC Discussion Group dubs itself “an informal non-partisan networking group of long term care (LTC) policy stakeholders.” You can participate in most of their meetings by phone. It’s a great way to stay abreast of all matters related to LTC financing and service delivery. I’ve addressed the group eight times over the years and follow them closely from afar nowadays.

Back to The LTC Wars (shawsky). What follows are excerpts from Mark J. Warshawsky and Ross A. Marchand, “Improving the System of Financing Long-Term Services and Supports for Older Americans,” Mercatus working paper, Mercatus Center, George Mason University, Washington, DC, January 2017. We’ll comment on each excerpt.

Improving LTSS: “Abstract: Medicaid currently pays for most of the long-term services and supports (LTSS) given to older Americans. With the aging of the population, these costs to state and federal governments will increase rapidly. We summarize the current Medicaid eligibility rules, which are commonly portrayed as allowing access only to low-income and low-asset populations, but in reality they allow covered households to own significant housing and retirement assets. Furthermore, we present new empirical information about the weak efforts of states in enforcing even the current porous rules. We then report on the extensive asset holdings, especially in housing and retirement assets, across the distribution of retired households. We find that liberal eligibility rules and uneven enforcement increase the costs of governments and discourage the retired households that can afford it from covering LTSS exposure through private insurance and assets. We conclude with targeted recommendations to reform Medicaid and improve the LTSS financing system, following up on some of the proposals made by members of the 2013 federal Commission on Long-Term Care.” (p. 2)

LTC Comment: Hear, hear! If you follow LTC Bullets and our many state and federal level reports, this should sound very familiar. Let’s look now at the details.

Improving LTSS: “Data are from the Health and Retirement Study (HRS 2012), the gold standard of data on the finances of older households, which is sponsored by the National Institute on Aging and is conducted by the University of Michigan, Ann Arbor.” (p. 3)

LTC Comment: Here we part company slightly. HRS and AHEAD, its companion survey focused on the oldest old, provide very dubious data on which to base conclusions about long-term care spending as we explained in “LTC Bullet: Behind AHEAD,” Friday, September 2, 2016. The HRS/AHEAD data are unreliable because respondents who provide them have conflicts of interest which invite deception and/or non-reporting. Besides, most assets covered in those surveys are exempt for Medicaid eligibility purposes, especially home equity and personal retirement accounts.

Improving LTSS: “In particular, the commission did not assess the extent of state efforts to recover assets (housing and other assets) from the estates of Medicaid recipients of LTSS. It did not estimate the asset holdings of older Americans from which financing of LTSS could be found. It also did not look carefully into the variability in state rules regarding the exclusion of retirement assets, such as individual retirement accounts (IRAs) and 401(k) accounts, from assets that count for Medicaid eligibility—the ‘millionaires on Medicaid’ problem.” (p. 8)

LTC Comment: Right on! That was the LTC Commission’s biggest single failing. What does this new paper tell us regarding how Medicaid overlooks assets that could fund LTC privately?

Improving LTSS: “As we will see, despite its reputation, Medicaid for LTSS is not just a program for the poor.” (p. 8)

LTC Comment: Hallelujah. It’s so good to hear someone else state the obvious truth almost uniformly evaded in most of the LTC financing literature.

Improving LTSS: “But some people become eligible for Medicaid because of their spending on LTSS: They ‘spend down’ to Medicaid eligibility by spending nearly all their income and some of their assets on services. Because nearly all income must be spent before Medicaid begins to pay, rules protect some income and assets for community-resident spouses. In addition, some assets are excluded, thus enabling a Medicaid recipient to retain assets of substantial value. For example, the value of the family home is protected during the lifetime of the Medicaid recipient and spouse.” (p. 9)

LTC Comment: Medicaid LTC eligibility rules require most income to be spent down either on health or LTC services. But the rules do not require assets to be spent down on care. It seems a minor point, but it is very important because much, not to say most, of the peer-reviewed literature gets it wrong, saying people must spend down assets for care services. The only actual requirement is that assets spent or divested must receive fair market value. So there is no restriction whatsoever on purchasing exempt assets, including a home, car, prepaid burials, etc., as a means to spend down to Medicaid eligibility.

Improving LTSS: “Medicaid allows the recipient to exclude from countable assets the value of the primary residence—up to $536,000 (indexed) in 2013, although states can allow up to $802,000 (indexed) in 2013—as well as a car, personal and household items, burial funds, term life insurance, and some or all qualified retirement assets in most states.” (p. 9)

LTC Comment: This quote is imprecise. Medicaid does not exclude home values, but rather home equity. A home worth $1 million would be exempt if the owner had a $.5 million mortgage on it. Also, why cite 2013 home equity exemption levels? The latest exemption, effective January 1, 2017, varies from $560,000 to $840,000 depending on the state.

Improving LTSS: “Despite varied efforts by the states to recover resources from estates of deceased Medicaid beneficiaries since Medicaid’s creation in 1965, there are no systematic data sources on these collections over the subsequent five-decade period. The US Department of Health and Human Services (HHS) published state-by-state estimates of estate collections for fiscal years 1985 and 1993, but these data preceded the Omnibus Reconciliation Act of 1993, which required states to attempt to recover resources from estates.” (p. 12)

LTC Comment: Actually, the USDHHS IG published a comprehensive report in 1988 titled “Medicaid Estate Recoveries” of which I was the author. Based on that study, we projected that if every state in the country collected from estates at the same rate as Oregon, which had the most successful estate recovery program at the time, total annual recoveries could have been $589.2 million instead of the 1985 actual recoveries of $41.7 million. Most of the recommendations in that report, including longer and stronger transfer of assets restrictions and mandatory estate recoveries, became federal law with the passage of the Omnibus Budget Reconciliation Act of 1993.

Improving LTSS: “Had all states met these [Idaho] ‘best efforts’ rates, which were in the range of 1 percent to 4 percent (hardly strenuous), nearly $20 billion more—$24 billion instead of $4.4 billion—could have been recovered for governments nationally from estates of deceased Medicaid LTSS beneficiaries in the 2002–2011 period.” (pps. 21-22)

LTC Comment: We certainly agree having said the same thing over two years ago in “LTC Bullet: IG Report Reveals Medicaid Estate Recovery Weakness,” Friday, December 5, 2014. To wit:

Nevertheless, actual and potential dollar recoveries are nothing to sneeze at: For example, what if every state in the country recovered at the same rate as the most successful state, Idaho? Total recoveries would have been $2,845,253,843 instead of $497,905,382 based on percentage of nursing home expenditures recovered and $2,941,856,963 instead of $497,905,382 based on percentage of total LTC costs recovered. That’s nearly $2.5 billion [per year] in money now allowed to pass unencumbered to heirs. Those lost funds have the effect of converting Medicaid from a long-term care safety net program for the needy to free inheritance insurance for prosperous baby boomers.

Improving LTSS: “Because a plurality of states counts both the applicant’s retirement assets and the spouse’s assets, and other states count at least some of the retirement assets of the relevant populations, the resulting weighted average is more than half (71.3 percent). However, stated another way, almost one-third of retirement assets are not counted toward Medicaid eligibility despite the policy intent that these tax-qualified assets be used not for bequest but for all types of spending in retirement. Moreover, most states have exemptions that allow seniors with access to well-funded retirement accounts to exclude said assets.” (p. 27) Consequently: ‘Vermont seniors with sizeable retirement assets can qualify for LTSS Medicaid at the expense of New Hampshire seniors a few miles away, who are barred from having those same retirement assets if they enroll in Medicaid.’” (p. 28)

LTC Comment: Because of the transition from mostly “defined benefit” to mostly “defined contribution” retirement savings plans, aging Americans now have trillions of dollars set aside in tax-deferred retirement accounts. The intent of Congress is clear that such assets “are uncounted as long as the [Medicaid] AR [applicant recipient] is receiving periodic interest and principal payments,” as we reported in “Medi-Cal Long-Term Care: Safety Net or Hammock?” (p. 21) based on Social Security Administration, POMS, “SI 01120.210 Retirement Funds,” https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120210. In other words, SSI regulations do not allow counting tax-sheltered retirement assets as long as those assets are being tapped periodically, as tax law requires beginning by age 70 and ½. Warshawsky and Marchand make an important contribution to the literature on this topic by reporting how different states treat these assets differently, resulting in their conclusion that overall more than two-thirds of these retirement assets are counted toward Medicaid eligibility.

Warshawsky has publicly expressed befuddlement at this outcome. How can different states interpret and enforce the law so differently causing inequities like the Vermont/New Hampshire example the paper cites. I can answer that question based on my experience three decades ago as a Medicaid State Representative for the Health Care Financing Administration (CMS’s predecessor). The reality is that state Medicaid programs flout federal law and regulations frequently and with impunity. Often federal Regional Offices do not hold states to the letter or even the spirit of the law. CMS did not enforce the OBRA ’93 estate recovery requirement on states. The main takeaway here is that although this paper concludes that 71.3 percent of retirement assets are counted toward determining Medicaid LTC eligibility, the federal law and regulations actually exclude nearly 100 percent and that is a condition that needs to be corrected if Medicaid is to maximize benefits for the poor and stop crowding out personal responsibility and long-term care planning among the affluent.

Improving LTSS: “To advocates of the federal provision of social insurance for LTSS, the current Medicaid program is inadequate. Furthermore, these advocates claim that failures in private insurance provision, coupled with the lack of retirement savings, make market solutions for the provision of LTSS untenable. As we have seen, such claims are not supported by the data.” (p. 35)

LTC Comment: Yes, thank you, exactly what we’ve been saying for so long.

Improving LTSS: “[E]mpirical evidence on the net worth of retired households clearly indicates widespread and significant holdings of housing and retirement assets. Those holdings are in precisely the asset classes that Medicaid rules and state administrations either always or sometimes exempt from consideration in determining eligibility (Warshawsky and Zohrabyan 2016). Lax eligibility criteria and administration, and weak estate recovery procedures and efforts, have led middle- and upper-income older Americans to seek Medicaid enrollment.” (p. 35)

LTC Comment: Yes again.

Improving LTSS: “To ensure that the Medicaid resources are allocated to individuals with insufficient financial means to pay for their long-term care, eligibility rules regarding retirement assets must be tightened across the country.” (p. 36)

LTC Comment: Of course.

Improving LTSS: “Additionally, the federal government should require states to narrow the ‘primary residence’ exclusion in examining applicants. . . . As we have seen in one study, older Americans vary home ownership depending on the rigidity of Medicaid policies. New federal rules requiring states to reject applicants with home equity interest exceeding $100,000 would diminish this strategic behavior and would ensure that program enrollees are those with legitimate financial need.” (p. 37)

LTC Comment: We’ve recommended an even lower home equity exemption of $50,000. Ironically, the current U.S.A. home equity exemption of up to $860,000 far exceeds the comparable exemption of 23,500 British pounds (approximately $29,500) in the UK’s socialized health care system. What’s more, the Brits limit their exemption to all assets, not just home equity. So much for the idea that ours is an evil, dog-eat-dog, force ‘em-into-impoverishment system.

Improving LTSS: “Preventing Medicaid funds from being distributed to households with significant assets also requires a more robust estate recovery scheme. Despite the growth in recovery programs over the past 15 years, recoveries represent a negligible percentage of both LTSS expenditures and the estimated net worth of program enrollees. With the best efforts of the most vigorous state, almost six times the current estate recoveries could be collected in aggregate by states.” (p. 37)

LTC Comment: Absolutely, we make the same point and elaborate on how to achieve it in “Maximizing NonTax Revenue from MaineCare Estate Recoveries” (2013); “Medicaid Estate Recoveries in Maine: Planning to Increase Non-Tax Revenue and Program Fairness” (1993); Medicaid Estate Recoveries: National Program Inspection (1988); The Medicaid Estate Recoveries Study--Volume I: Estate Recoveries in the Medicaid Program (1985) and in these LTC Bullets: LTC Bullet: Medicaid Estate Recovery, Wednesday November 8, 2000; LTC Bullet: Medicaid Estate Recoveries Clarified by HCFA, Wednesday March 7, 2001; LTC Bullet: The Critical Role of Medicaid Estate Recoveries, Friday, September 30, 2005; LTC Bullet: Medicaid Estate Recover. . .up, Thursday, July 5, 2007; LTC Bullet: How Estate Recovery Protects the Poor AND the Affluent, Wednesday, July 1, 2009; LTC Bullet: How Medicaid LTC Sprung a Leak, Monday, September 14, 2009; LTC Bullet: Center Tackles Medicaid Estate Recoveries, Friday, April 26, 2013; LTC Bullet: The Role of Estate Recoveries in LTC Financing, Friday, June 7, 2013; LTC Bullet: Free LTC Loan With No Pay Back Required, Friday, August 22, 2014; LTC Bullet: Holding CMS’s Feet to the Fire, Friday, February 6, 2015; LTC Bullet: Real ID vs. Estate Recoveries: A Decade of Divergence, Friday, February 26, 2016.

Improving LTSS: “Specifically, the federal government should enforce the existing requirement on states to automatically impose liens on the housing properties of beneficiaries. Imposing these liens in all cases would significantly improve recovery rates.” (pps. 37-38)

LTC Comment: This is incorrect. There should be a mandatory lien on real property of Medicaid LTC recipients, but there is none. States may impose liens, but many do not. According to Medicaid.gov: “States may impose liens for Medicaid benefits incorrectly paid pursuant to a court judgment. States may also impose liens on real property during the lifetime of a Medicaid enrollee who is permanently institutionalized, except when one of the following individuals resides in the home: the spouse, child under age 21, blind or disabled child of any age, or sibling who has an equity interest in the home. The states must remove the lien when the Medicaid enrollee is discharged from the facility and returns home.” (“Estate Recovery and Liens” at https://www.medicaid.gov/medicaid/eligibility/estate-recovery/index.html)

Improving LTSS: “As a penalty for state noncompliance with the housing lien procedures and to counteract the weak state incentives to collect, the federal government should decrease Medicaid matching rates for LTSS expenditures for states performing inadequately.” (p. 38)

LTC Comment: With the correction that estate recovery, not imposition of a lien, is the federal requirement, states definitely should be penalized for failure to conduct estate recovery effectively and efficiently. This should have been done all along and does not require Congressional action to lower federal financial participation for deficient states. Federal Medicaid Regional Offices have financial auditors whose job it is to evaluate whether state Medicaid programs are complying with federal law and regulations and to lodge claims for reimbursement of federal funds in cases of non-compliance. The fact that states like Texas, Michigan, Georgia and New Mexico failed to implement estate recoveries for many years after such programs were mandated by OBRA ’93 is the result of CMS’s Regional and Central Offices’ failure to enforce the law.

Improving LTSS: “Data show that even at the median of the older population, substantial assets exist to pay for retirement expenses, including LTSS. With updated eligibility-determination rules and processes, systematic asset tracking, and enhanced estate recovery programs, the Medicaid LTSS program can achieve financial sustainability and simultaneously reduce the crowding out of private alternatives such as LTCI. Federal mandates requiring states to undertake these reforms can result in substantial future savings for taxpayers while strengthening a key part of the social safety net for those who truly need it.” (p. 39)

LTC Comment: Bottom line: we don’t need a new compulsory social insurance program for long-term care. What we need to is give Medicaid back to the needy and incentivize everyone else, with carrots and sticks, to plan early and save, invest or insure for long-term care.

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Updated, Tuesday, February 21, 2017, 11:19 AM (Pacific)

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LTC E-ALERT #17-007: LTC NEWS AND COMMENT

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:

Dementia Joins Ranks of Top Global Killers with No Drug in Sight
Plan ahead, protect assets from nursing home costs
The New Offensive on Alzheimer’s Disease: Stop it Before it Starts
Report: Average annual cost of skilled nursing care breaks $100,000 for first time
The Biggest Wild Card In Retirement And How To Deal With It
The Urban Institute Model Of Financing Long-Term Services And Supports: A Critical Review
5 Long-Term Care Planning Lessons From 'Willy Wonka And The Chocolate Factory'
Top Ways to Protect Your Assets from Nursing Home Costs
GAO: CMS needs better data to prevent HCBS overpayments, fraud
5 biggest tax breaks for the self-employed

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Updated, Friday, February 17, 2017, 9:57 AM (Pacific)

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LTC BULLET: HOW TO MAKE MEDICAID BLOCK GRANTS WORK FOR TAXPAYERS, LTC PROVIDERS, AND THE NEEDY

LTC Comment: The new administration has proposed block-granting Medicaid, but dissenters claim it would hurt the poor, especially the elderly. How to make it work better for everyone, after the ***news.***

*** THE 17^th ANNUAL ILTCI CONFERENCE, with the theme “Navigating the Future,” will convene March 26-29, 2017 at the Hyatt Regency in Jacksonville, Florida. Organizers report continuance of the ILTCI Future Leaders Program, which “is intended to give promising early-to-mid level management and other non-management professionals with leadership potential the opportunity to participate in a half-day pre-conference seminar and networking function at a significant discount from the standard ILTCI registration rate.” For more information, contact info@iltciconf.org. To the same email address, they invite you to “send us questions related to any area of Underwriting, Claims and Sales; the interaction between the areas and how the current and changing State of the Union of LTC has impacted these areas.” Your questions will be answered by a panel of experts at the conference. ***

*** WARSHAWSKY ON THE WARPATH: Mark Warshawsky, who co-chaired the 2013 “Long-Term Care Commission,” has authored a devastating critique of the research used to justify the latest plan for a new government long-term care entitlement. In “The Urban Institute Model of Financing Long-Term Services and Supports: A Critical Review,” he demolishes the intellectual foundations behind the growing consensus that what America needs now is a compulsory, payroll-financed, centrally planned government program to cover the back end long-term care risk. That plan, endorsed by the LTC provider association LeadingAge, the Bipartisan Policy Center, and the ad hoc Long-Term Care Financing Collaborative, was based on research reported in a 2015 Health Affairs article titled “Financing Long-Term Services and Supports: Options Reflect Trade- Offs for Older Americans and Federal Spending,” by Melissa M. Favreault, Howard Gleckman, and Richard W. Johnson. Our own critique of that research was published in “LTC Bullet: LTC at a Crossroads” on Friday, June 3, 2016. ***

2/16/2017, “Report: Average annual cost of skilled nursing care breaks $100,000 for first time,” by Emily Mongan, McKnight's Long-Term Care News

Quote: “The average national cost for both private and semi-private skilled nursing facility rooms has jumped again, with the average price of a private room reaching $102,900, according to a new report. Lincoln Financial Group's annual ‘What Care Costs’ study, released Wednesday, shows the national average private skilled nursing room cost jumped 3.3% in 2016, up from $99,600 in 2015. Semi-private room costs reached an average of $89,305, up 2.6% from $87,000 in 2015.

“The Lincoln report also includes a forecast of what the long-term care landscape could look like in 2050, 'when the population of individuals 65+ years of age will have doubled and long-term care services are in even greater demand.’ A semi-private room in a nursing home is expected to reach $206,590 by then.”

LTC Comment: Refer to article to access the full report. ***

LTC BULLET: HOW TO MAKE MEDICAID BLOCK GRANTS WORK FOR TAXPAYERS, LTC PROVIDERS, AND THE NEEDY

LTC Comment: Debates over block-granting Medicaid are nothing new. After Newt Gingrich and the Republicans swept into power in 1994, the block grant idea was all the rage. Opposition then as now focused on the consequences of ending the unlimited federal financial support of the rapidly growing entitlement program. Could states shoulder the extra fiscal burden? Would they? How would the poor fare? Especially the elderly poor? Oh my, we could be leaping out of the burgeoning-budget frying pan into the fire of social distress.

Back then, I thought “bunk.” If we cap federal spending on Medicaid, radically reduce federal strings attached to the money, and let 50 states experiment with creative ways to handle eligibility, service delivery, and reimbursement, the result will be better access to higher quality care for rich and poor alike. How and why, you might ask. Well, I laid that answer out in detail, including a model state statute in 1995. Circumstances have changed in the meantime, but not enough to derail the basic plan.

Check it out. I presented the following paper at the 22nd Annual Meeting of the American Legislative Exchange Council in San Diego on August 10, 1995. It was later published in “The Long-Term Care Financing Crisis: Danger or Opportunity? A Case Study in Maryland.”

Long-Term Care Financing Under a Medicaid Block Grant
Notes Toward a Model State Statute

by
Stephen A. Moses

I. Introduction

Medicaid is known as the "pac-man" of state budgets and the "800-pound gorilla" of long-term care. We all know something has to be done to control this fiscally hemorrhaging giant.

On the positive side, if Medicaid block grants pass this year, states will have the authority for the first time to implement the proper corrective actions. That is a tremendous incentive to prepare now to meet the risks and opportunities that lie immediately ahead.

The big questions public policy makers face are what to do and how to do it. We cannot plot a course of corrective action until we understand completely the mess we are in and how we got into it. The purpose of this paper is to explain the problem, show how it developed and propose a solution.

Medicaid nursing home expenditures nearly doubled between Federal Fiscal Year (FFY) 1988 and FFY 1993. Today, Medicaid pays for 73.7 percent of all nursing home patient days in the United States. At least 85 to 90 percent of all nursing home payments come from Medicaid, Social Security benefits contributed by Medicaid patients toward their cost of care, Medicare, or private patient income (not assets). Dozens of recent empirical studies indicate that Medicaid "spenddown" is much lower than previously believed. In fact, there is no evidence whatsoever of the much-touted, widespread catastrophic spenddown.

Although Medicaid is ostensibly a means-tested public assistance program, i.e. welfare, evidence abounds that middle-class Americans and even the well-to-do qualify easily for the program's nursing home benefits. Congressional actions (in OBRA '93) to close Medicaid eligibility loopholes and mandate estate recovery have had little effect because of unforeseen weaknesses in the law, sluggish implementation by the states, lukewarm enforcement by the Health Care Financing Administration, and creative end-running by public and private Medicaid estate planning attorneys.

Finally, Medicaid has developed a dismal reputation for problems of access, quality, reimbursement, discrimination, institutional bias, and welfare stigma. How did America come to provide for the long-term care needs of its proud, self-reliant World War II generation by consigning them to a welfare program that is going bankrupt?

II. Background

In 1965, America was just starting to have a problem with long-term care. People were living longer, but dying slower of chronic illnesses that caused frailty and cognitive impairment. That was when a prosperous private market in low-cost home and community-based services and long-term care insurance might have developed in the United States. It did not.

Instead, with every good intention, the new Medicaid program offered publicly financed nursing home care. This subsidy confronted families with a very difficult choice. They could pay out-of-pocket for the home care and assisted living services seniors prefer or they could accept nursing home care paid for by the government. Most people chose the safety and financial benefits of the Medicaid option. Therefore, the market for home care withered, private long-term care insurance expired stillborn, and Medicaid-financed nursing home care flourished.

The nursing home industry took full advantage of this situation. As fast as the industry could build them, nursing home beds filled with Medicaid residents. Stunned by the cost, Medicaid attempted to control the construction of new beds with Certificate of Need (CON) programs on the principle that "we cannot pay for a bed that does not exist." By the mid-1970's, health planning for nursing homes was in full swing.

Capping supply, however, only spurred the nursing home industry to drive up rates. Government costs grew faster than ever. So Medicaid capped reimbursement rates too. This compelled the nursing home industry to increase private pay reimbursement rates to compensate. So began the highly problematical differential between Medicaid rates and private pay rates. Today, Medicaid pays only 80 percent of private pay rates on average nationally.

Higher private rates made Medicaid more attractive to private payers and this led to pressure on legislators to liberalize Medicaid eligibility. A long process of eligibility bracket creep gradually made Medicaid nursing home benefits available even to upper middle class people who had or could obtain the expertise to manipulate eligibility rules. A whole sub-practice of law--Medicaid estate planning--developed to take advantage of this new opportunity.

With the supply and price of nursing home beds capped by government fiat and with Medicaid eligibility increasingly generous, nursing home occupancy skyrocketed to 95 percent nationally. Nursing home operators realized they could fill their beds easily with low-paying Medicaid patients no matter what kind of care they offered. To achieve adequate operating margins, however, nursing homes had to attract a sufficient supply of full-paying private patients or they had to cut costs drastically.

If they tried to attract more lucrative private payers with preferred treatment, however, the nursing homes were deemed guilty of discrimination against Medicaid patients. If they tried to cut costs instead, they came under fire for technical violations or quality problems. In response, Congress and state governments pressured the industry to provide higher quality care without discriminating against low-paying Medicaid recipients. Given its fiscal duress, however, Medicaid could not offer higher reimbursement rates to achieve these goals.

Caught between the proverbial rock and a hard place, the nursing home industry put up a strong fight. Armed with the Boren Amendment, a law that requires Medicaid to provide reimbursement adequate to operate an efficient nursing facility, many state nursing home associations took the battle to court. By now, however, state and federal Medicaid expenditures were rising so fast and taxpayers were so reluctant to pay for growing public spending that large increases in nursing home reimbursement were out of the question.

In the meantime, a wave of academic speculation in the late 1970's indicated that paying for home and community-based services (HCBS) instead of nursing home care could save a lot of money. For years, therefore, Medicaid experimented with HCBS waivers as a cost-saving measure. In time, however, hard empirical research showed that (desirable as they may be) home and community-based services do not save money overall. Today, institutional bias remains Medicaid's strongest cost containment tool and one of its gravest deficiencies.

In a nutshell, just as heavy demand was building for a private seniors housing market in the 1960's, Medicaid co-opted the trend by providing easy access to subsidized nursing home care. Confronted with a choice between paying out-of-pocket for a lower level of care or receiving a higher level of care at much less expense, seniors and their families made the predictable economic choice. Not surprisingly, Medicaid nursing home caseloads and expenditures increased rapidly and drastically. In response, Medicaid capped bed supply and reimbursement rates, which led inevitably to excessively high occupancy, private-pay rate inflation, discrimination against low-paying Medicaid patients, and increasingly serious quality problems. In time, Medicaid nursing home care acquired its reputation for impeded access, doubtful quality, inadequate reimbursement, widespread discrimination, pervasive institutional bias, and excessive cost. Medicaid remains, however, the only way the middle class can pay for long-term care without spending their savings. That is why so many otherwise independent and responsible Americans end up dying in nursing homes on welfare.

III. The Challenge

If the foregoing analysis of the Medicaid malaise is accurate, a sensible solution comes easily into focus. To facilitate universal access to top quality long-term care for all Americans, a new, cost-effective, block-granted, publicly financed, long-term care program should have the following characteristics.

· It should save taxpayers money while improving access to quality long-term care for all citizens;

· It should encourage, instead of discouraging, private financing of home and community-based services and assisted living;

· It should encourage, instead of discouraging, the purchase of private long-term care insurance to pay for all levels of extended care;

· It should combine generous eligibility criteria to protect the unprotected with strong incentives for everyone to plan ahead for self-protection;

· It should pay market-based reimbursement rates to assure access to quality care for all participants and to eliminate discrimination;

· It should promote strong market competition between providers of all levels of care;

· It should maximize the number of consumers in the marketplace who have a pecuniary interest in getting the best possible care at the lowest possible price.

Is a single program that combines all these features possible? Yes, but only if it is based on a common understanding and agreement as to its goals and objectives. In the course of numerous research studies over the past 12 years, I have found almost universal consensus on the following ethical foundation.

IV. The Moral High Ground

We have very limited dollars available for public assistance. We must take care of the truly poor and disadvantaged first. The middle class and well-to-do should pay privately for long-term care to the extent they are able without suffering financial devastation. Prosperous people who rely on public assistance for long-term care should reimburse the taxpayers before giving away their wealth to heirs. Seniors and their heirs who wish to avoid such recovery from the estate should plan ahead, purchase private long-term care insurance, and pay privately for the care of their choice when the time comes.

What would a publicly financed long-term care program based on this philosophical underpinning look like?

V. Model State Statute for a Senior Financial Security Program (SFSP)

(Rough draft state statutory language is presented below in highlighted italics.) The following are the key components of the program.

A. Preserve generous eligibility

1. Status Quo

Despite the conventional wisdom that seniors must spend down their life savings to receive Medicaid nursing home benefits, the truth is that most seniors qualify easily regardless of income or assets.

Most state Medicaid programs place no limit on how much income someone can have and still qualify for nursing home benefits. If your total medical costs, including nursing home care, approximate or exceed your income, you are eligible.

The well-known $2,000 limit on assets is meaningless. Medicaid recipients can also keep exempt assets of unlimited value, such as a home [later capped at $500,000 to $750,000 in equity with annual increases for inflation], a business, and a car. Married folks have it even easier than single people. They can shelter an additional $74,820 in assets and $1,870.50 per month in income. [These amounts also increased annually with inflation.]

For the truly well-to-do, even these generous limits are easily overcome. Any competent Medicaid planner can deliver Medicaid eligibility almost overnight to practically anyone for less than the cost of one month in a private nursing home.

Given Medicaid's generous nursing home eligibility criteria, there is little wonder why most Americans (1) fail to plan ahead for long-term care risk, (2) neglect to purchase private long-term care insurance, (3) hesitate to spend their own money on home care or assisted living, and (4) end up in nursing homes subsidized by Medicaid.

2. Senior Financial Security Program

Drastically cutting Medicaid nursing home eligibility and coverage for the middle class is not politically feasible. Strong senior interest groups would fight such cuts aggressively and both private and legal services attorneys would tie such a system in knots of litigation. Fortunately, it is not necessary to burn the village in order to save it. The Senior Financial Security Program preserves Medicaid's generous eligibility and coverage. This is the program's biggest political selling point.

3. Model State Statute

"Seniors who need nursing home care may qualify for the Senior Financial Security Program if their income is inadequate to pay for such care and if their assets do not exceed $2,000 plus certain exempt resources enumerated below.

"To qualify for assistance, however, every participant must provide a net worth statement confirmed by a certified public accountant. This net worth statement constitutes security offered by program participants to assure repayment of benefits received. As the participant receives benefits, the cost to the SFSP will be deducted from the participant's net worth ledger. As long as the ledger has a positive balance, the program participant is in receipt of a government-sponsored loan. When the ledger's balance turns negative, the participant converts to 'public assistance.'

"Exempt assets that SFSP participants may retain are similar to those permitted by the traditional Medicaid program with a few additional limitations.

"Home: no limit on value for one single-family residence, however, expensive homes purchased (or additions constructed) within eight years of applying for benefits will be treated as a transfer of assets to qualify (see transfer of assets restrictions below).

"Automobile: one car of any value provided it is actually used for the benefit of the program participant. Transfer of an automobile, even though exempt, will be deemed a transfer of assets subject to penalty. Program participants may not give away exempt assets and replace them with new exempt assets as a means to qualify for assistance or avoid estate recovery.

"Funeral plan: one prepaid funeral plan, not to exceed the average cost in the state of a simple service and disposal of remains (perhaps $2,500). Program participants may not shelter tens of thousands of dollars in burial plans as a means to qualify for assistance.

"Other exempt resources and limitations to be delineated."

B. Prohibit divestiture

1. Status Quo

Under the existing Medicaid program, anyone who transfers assets three years [increased to five years in the Deficit Reduction Act of 2005] before applying for assistance can give away any amount of money and qualify with no questions asked. Unfortunately, the average period of time from onset to death in Alzheimer's Disease is eight years. If the family transfers her assets the first time Grandma forgets to turn off the stove, they guarantee her unlimited Medicaid nursing home benefits three years later with no expense or inconvenience.

Today, many Medicaid estate planning attorneys advise their clients and colleagues to initiate a "gifting strategy" years in advance in order to assure easy Medicaid eligibility. Such a strategy may include many tactics including outright gifts, establishment of trusts, retention of life estates, purchase of a partial interest in adult children's homes, and conversion of non-exempt into exempt assets. The options are limited only by the imagination of the Medicaid planner.

2. Senior Financial Security Program

The SFSP cannot protect generous eligibility and survive without eliminating divestiture planning altogether. Seniors and their heirs must get the message very clearly that long-term care is an enormous financial risk, that people should save and insure throughout their lives to protect against this risk, and that giving away assets for any reason at a time when the long-term care risk is at its peak is a very dangerous proposition.

Of course, by birthright, any American is free to dispose of his assets in any way he wishes and at any time. One must no longer be allowed, however, to give away one's wealth in order to compel other Americans to provide oneself with expensive long-term care benefits.

Adult children, other relatives, friends and charities to whom older people give away income or assets must realize that if such a gift leaves seniors unable to pay for their own care and dependent on the public dole, that the state will seek restitution.

3. Model State Statute

"Any assets transferred for less than fair market value within eight years of applying for assistance constitute a debt owing the state (up to the total public benefits paid) and such debt is payable by the transferees who received the assets and/or by the estate of the program participant or by such persons who may have received the assets by means other than a formal probated estate. Any asset transferred in contemplation of qualifying for the SFSP or of avoiding estate recovery shall be considered a fraudulent conveyance.

"A transfer of assets is any divestiture of purchasing power including but not limited to gifts, purchase of exempt assets, divorce, purchase of unsalable or undividable property, divestment into trusts, converting assets into joint tenancy, etc.

"The intent of this provision is to assure that no purchasing power possessed within eight years of application by anyone who later depends on the SFSP shall be used for any other purpose than the care and maintenance of the owner or reimbursement to the SFSP for providing such care and maintenance.

"If any purchasing power shall have been taken from an SFSP participant improperly or illegally, the program shall petition the appropriate court to appoint a private attorney as the participant's conservator (reimbursed on contingency) to recoup the misappropriated assets on behalf of the participant and the program. Such recoupment may include relitigating abusive divorce decrees, reversing improper asset transfers, invading inappropriate trusts, and partitioning undivided property."

C. Require legal security as a condition of eligibility

1. Status Quo

Exempt assets divested legally or illegally while on Medicaid are lost forever as a source of long-term care financing for seniors. Nor can such divested resources serve as a non-tax revenue source to the program. Under the existing Medicaid program, states are permitted--but not required--to place liens on the homes of recipients under certain highly restrictive circumstances. Very few states use the lien authority to secure assets for later recovery. Even states that utilize liens have limited success enforcing and collecting on them because of extensive exclusions in the federal law. Consequently, exempt and non-exempt assets held openly or concealed by Medicaid recipients routinely disappear during the period of eligibility either legally or illegally as relatives, friends and others take advantage of the senior's incapacity to relieve them of their resources.

2. Senior Financial Security Program

No competent financial institution will extend a loan of hundreds of thousands of dollars to anyone without requiring security. The government can no longer afford to do so either. People who expect to depend on the SFSP while preserving substantial income and assets for the support of their dependents must realize and agree that they lose some measure of control over these resources in the process.

Of course, all citizens have the option to use their income and assets as they see fit. For example, they can sell their homes and cars to pay privately for long-term care if they choose. But if they prefer to use a public program to pay for their care, they must recognize the obligation to encumber their resources for later recovery, after the resources are no longer needed by their legitimate surviving dependents.

3. Model State Statute

"As a condition of eligibility for the SFSP, all participants must allow the state to place a lien on their exempt property. The lien shall apply to all real and personal property retained by the participant with the exception of the $2,000 liquid asset exclusion and certain highly private personal property such as original wedding rings.

"Such liens shall be officially recorded in the appropriate legal manner and shall be enforceable upon sale of the asset or upon the death of a program participant, or if the participant is survived by a legitimate dependent, upon the death of the last surviving exempt dependent relative (to be defined).

"Nothing in this statute shall be construed in any way to prohibit or prevent an SFSP participant from disposing of his property in any way he sees fit. The sole purpose is to assure that his creditor, i.e. the state in the form of the SFSP, knows of the transaction, can recover benefits paid as appropriate, and can terminate eligibility if appropriate."

D. Require estate recoveries

1. Status Quo

For most of the history of the existing Medicaid program, nursing home recipients could preserve unlimited exempt assets in the form of homes, cars and personal property and pass this wealth to their heirs completely unencumbered. It was not until the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA '82) that Congress gave state Medicaid programs the authority to recover from recipient's estates. It was not until the Omnibus Budget Reconciliation Act of 1993 that Congress required estate recoveries. Consequently, few states have so far implemented strong, cost-effective estate recovery programs.

2. Senior Financial Security Program

As long as Americans can ignore the risk of long-term care, avoid the premiums for private insurance, wait to see if they ever need to go to a nursing home, and if so, get the government to pay while still passing all their wealth to heirs, most people will not pay for their own care and public costs will continue to explode. Extensive research indicates that states can save five percent or more of the cost of their nursing home programs by recovering benefits paid from the estates of deceased recipients. The potential liability of estate recovery provides a huge incentive for future generations to insure privately or pay for less expensive, lower levels of care in the private marketplace in order to avoid or postpone exorbitant nursing home costs. By requiring and strictly enforcing estate recovery, the SFSP assures that those participants, who are able, pay their own way thus preserving their dignity it is not welfare if you pay it back.

3. Model State Statute

"Every participant in the Senior Financial Security Program must agree in writing to pay back the entire cost of care from his or her estate or from the proceeds of sale of real or personal property during program eligibility up to the total value of the estate or sale. If the program participant should predecease a spouse or other legitimate, dependent heir or joint tenant, the participant's share of any jointly owned property or purchasing power shall be recovered from such third party as soon as it is no longer needed for the maintenance of the dependent, and in any case, no later than upon the death of the dependent third party.

"It is expressly understood that the term 'estate' is not limited to the formal probated estate, but includes all purchasing power held by the program participant within eight years of applying for the SFSP in whatever form it passes to another before or after program participation and later death.

"The intent of this rule is to assure that people pay for their own long-term care, either directly by retaining providers in the private marketplace or indirectly by reimbursing the Senior Financial Security Program. The financial viability of the SFSP and its ability to provide care to less fortunate participants depends on strong estate recovery enforcement."

E. Encourage home and community-based services and long-term care insurance

1. Status Quo

As explained in the background section of this paper, Medicaid extinguished the private markets for home and community-based services (HCBS) and long-term care insurance when it began providing subsidized nursing home care in 1965. Later efforts to retrofit HCBS and encourage private insurance, i.e., Medicaid waivers and public/private partnerships respectively, have proven to be too little too late. With all its resources sucked into the black hole of institutional long-term care, state Medicaid programs have been unable to fund the HCBS waivers adequately. With regard to long-term care insurance: people do not buy apples on one side of the street when they can get them for free on the other.

2. Senior Financial Security Program

By prohibiting divestiture of assets to qualify, by requiring liens on all property as a condition of eligibility, and by mandating recovery from estates of every program participant who retains exempt assets, the SFSP creates an enormous incentive for future generations to plan ahead, buy insurance, pay privately for home care or assisted living, and avoid as long as possible starting the meter running for publicly financed nursing home care. Nevertheless, the SFSP should make this goal explicit in the program's statutory language.

3. Model State Statute

"The purpose of the Senior Financial Security Program is to protect those who are unable to take care of themselves. The program does not replace any individuals' responsibility to provide for their own long-term care. Program requirements that prohibit divestiture of assets, require security for benefits paid, and mandate recovery from estates are expressly intended to encourage all citizens to plan ahead, purchase quality long-term care insurance, pay privately for appropriate, cost-effective levels of care, and rely on the Senior Financial Security Program only as a last resort."

F. Educate the public

1. Status Quo

The main reason that Medicaid nursing home costs have grown explosively for 30 years is that the program desensitized the public to the risk and cost of long-term care. Most people today do not know who pays for long-term care. Medicare, Medicaid or Santa Claus--why should it matter? All the public knows for sure is that someone must pay, because they hear few genuine anecdotes of catastrophic spenddown and they rarely see Alzheimer's patients wandering the streets with nowhere to go and no one to take care of them. Until Americans understand and internalize the risk of long-term care, they will not plan ahead to protect themselves against it and they will continue to end up in nursing homes on Medicaid.

Extensive research over the past 12 years suggests that Medicaid nursing home expenditures could be reduced by as much as 15 to 20 percent by persuading the public to pay privately for long-term care either out-of-pocket or by means of insurance coverage.

2. Senior Financial Security Program

The big challenge to public policy is to provide a long-term care safety net that protects the frail and vulnerable without discouraging the hale and able from planning ahead to take care of themselves. The SFSP achieves this objective by building a downside risk into reliance on public financing of long-term care, i.e. the lien and estate recovery liability, and by aggressively promulgating information about the probability, cost, and personal responsibility of long-term care. To assure that this critical feature of the program is not neglected, the SFSP model statute expressly incorporates a non-tax revenue source to support it.

3. Model State Statute

"Ten percent (or such proportion as shall be necessary to achieve the objective) of the revenue generated by Senior Financial Security Program's lien and estate recovery efforts shall be used exclusively to support a public education initiative on long-term care. The purpose of this initiative is to educate the public, the medical profession, the bar, the judiciary, financial advisors, and all other individuals in the community who influence the lives of older people, concerning the importance of long-term care planning. Such education and training will include but not be limited to (1) the probability of requiring long-term care, (2) the average incidence, duration and cost of nursing home care, (3) the principles of how to identify and select a reliable long-term care insurance policy, (4) the kinds of free and fee-for-service assistance available to postpone institutionalization (e.g., meals on wheels, chore services, adult day care, congregate care, assisted living, etc.), and (5) the eligibility, lien and estate recovery requirements associated with dependency on the Senior Financial Security Program.

"The purpose of this education program is to assure that no one in the state turns 50 years of age without having received complete information on long-term care risk and on all of the private options available to plan for it."

VI. Conclusion

Fully implemented and aggressively enforced, the Senior Financial Security Program will empower any state to assure universal access to top quality long-term care for rich and poor citizens alike across the entire continuum from home and community-based services to sub-acute nursing home care while simultaneously saving the taxpayers money and enhancing the private market for all long-term care providers and insurers.

The goal of the program should be to provide eligibility and coverage equal to or better than conventional Medicaid nursing home benefits at no more than 80 percent of the former cost. In 1993 dollars, this constitutes a savings to taxpayers of approximately $5 billion per year nationally.

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Updated, Monday, February 13, 2017, 9:43 AM (Pacific)

Seattle—

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LTC E-ALERT #17-006: LTC NEWS AND COMMENT

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:

EXCLUSIVE: New York medical marijuana grower eyes nursing homes as new market
Long Term Care Insurance Industry Paid $8.65 Billion in Claims
New Federal Rules Will Require Home Health Agencies To Do Much More For Patients
GAO recommends increased CMS oversight of Medicaid LTSS payment rates
Put long-term care within reach
Opinion: We can change Medicare without hurting Americans — the answer lies in this plan
House panel marks up Medicaid planning annuity bill
42% of those 55+ worry about housing affordability daily: survey
Senators call for more Alzheimer's funding
Medicaid oversight stalled by inaccurate, incomplete data, report finds
Finding and keeping caregivers: A growing crisis
How Would Republican Plans for Medicaid Block Grants Actually Work?

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Updated, Friday, February 10, 2017, 10:38 AM (Pacific)

Seattle—

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LTC BULLET: CLASS REDUX?

LTC Comment: Washington State legislators propose another LTC fantasy plan. Will they never learn? Details after the ***news.***

*** CLTC AND ILTCI COOPERATION: According to an announcement by CLTC [Certified in Long-Term Care]: “CLTC and ILTCI [Intercompany Long-Term Care Insurance Conference] are working together to help enhance the knowledge and raise awareness of the importance of long term care insurance and the various options available to deal with the risks posed by long term care needs. As part of this effort, ILTCI is offering a Producer scholarship program for CLTC graduates to attend the organization's annual conference March 26-29 in Jacksonville, FL. CLTC graduates are invited to participate in the Producer Scholarship program which reduces the cost of the individual conference registration fee to $295 (from $995).”

Likewise: “This year, Bill Comfort will conduct a CLTC Master Class on Saturday, March 25 (8AM to 6PM) and Sunday, March 26 (8AM to 5PM). The 2-day course will review all the course material and prepare attendees to take the CLTC exam. There is no additional charge for the course material, exam fee or CE filing. Attendees that pass the CLTC exam will receive their CLTC designation upon passing the exam. The course will qualify each attendee for 8-15 hours of state insurance department CE credits (depending upon student's resident state) as well as for CFP/PACE credits (a $25 additional filing fee applies for recording CFP/PACE credits, if desired). Regular full price tuition for the course is $1,165. However, the ILTCI Conference will be subsidizing the course fee for any attendees of the ILTCI Conference, for an additional fee of only $199. Registration for the CLTC course can be completed when registering for the conference.” ***

LTC BULLET: CLASS REDUX?

LTC Comment: Laurie Jinkins and Norm Johnson are state legislators representing Tacoma and Yakima, Washington respectively. They have a plan to fix long-term care financing. Here’s how they described it in a Seattle Times column last Tuesday.

Our legislation would create a long-term care insurance benefit to help seniors and their families pay for long-term services and support while protecting seniors’ retirement savings and assets. Funds from a 0.49 percent assessment deducted from workers’ pay would fund the trust and be disbursed through a program overseen by a public-private commission. Workers would be eligible to draw on the benefits of the trust after they’ve worked three of the past six years, or 10 years total.

Sound familiar? Haven’t we been to this party before and awakened with a bad hangover? When legislators and bureaucrats set out to do what even highly trained actuaries in the private sector have found perplexingly difficult, don’t get your hopes up. Let’s take a closer look at the specifics of their plan. Find the Long-Term Care Trust Act here: HB 1636. We’ll quote from it and comment.

HB 1636 Quote: “The legislature finds that: Long-term care is not covered by medicare or other health insurance plans, and private long-term care insurance plans that do exist are unaffordable for most people; this leaves more than ninety percent of seniors uninsured for long-term care.”

LTC Comment: Hmmm, evidently no one told them about Medicaid, the biggest payer of long-term care in Washington State and everywhere else. Easy access to Medicaid LTC benefits after the insurable event has already occurred crowded out demand for private LTC insurance resulting in the challenges that product faces today.

HB 1636 Quote: “Without access to insurance, seniors must rely on family care and spend down their life savings to poverty levels in order to access long-term care through medicaid.”

LTC Comment: Oh, they know about Medicaid after all. But they don’t know much. In Washington State, median to high-income people can qualify for Medicaid if they have significant medical or LTC expenditures as most people who need long-term care do. Most assets are exempt, such as home equity up to $560,000, plus unlimited personal belongings, home furnishings, prepaid burial plans, one car, one business, IRAs if they’re paying out and on and on. People who still own too much can find a Medicaid planner here and get a Medicaid-compliant annuity, employ the “reverse half a loaf” strategy, or just buy a lot of exempt assets. I wrote about the “Fallacy of Impoverishment” in the Gerontologist 27 years ago and, despite some successful efforts in the meantime to curtail Medicaid planning abuses on the margin, the reality remains that most people can ignore LTC risk, avoid LTCI premiums, wait to see if they ever need extended care and pass the cost to taxpayers while retaining most of their assets for heirs.

HB 1636 Quote: “The long-term services and supports trust commission is established. The commission shall include: (a) One member from each of the two largest caucuses of the house of representatives, appointed by the speaker of the house of representatives; (b) One member from each of the two largest caucuses of the senate, appoint [sic] by the president of the senate; (c) The commissioner of the department, or his or her designee; (d) The secretary of the department of social and health services, or his or her designee; (e) Two representatives of long-term services and supports providers, one of which is a representative of a union representing long-term care workers; (f) Two representatives of an organization representing retired persons; and (g) Two representatives of consumers receiving long-term services and supports.”

LTC Comment: Thus, the commission responsible to “establish rules and policies regarding” enrollee eligibility, provider qualifications, benefit payments, assessment standards and procedures, operational standards, annual benefit adjustments, and solvency and financial status reports . . . lacks representation by the one group of experts who actually know how to set up and run a successful long-term care insurance program. To wit, the thousands of long-term care policy experts, actuaries, claims adjudicators, and case managers who make private LTC insurance work all across the country. They succeed somehow in spite of public policies that severely impede their efforts. Shame on any public official who ignores their expertise and their contributions to solving the LTC financing crisis.

HB 1636 Quote: “The department shall deem an individual to be a qualified enrollee under the program if the individual: (a) Is at least eighteen years old; (b) Is a Washington resident; (c) Has paid the long-term services and supports assessment established under section 9 of this act for the equivalent of either: (i) A total of ten years without an interruption of five or more consecutive years; or (ii) Three years within a six-year period.”

LTC Comment: Lucky Washingtonians. This program captures every, hard-working resident of the state and grants them the privilege of contributing even more of their meager and vulnerable incomes to fund yet another long-shot government gamble.

HB 1636 Quote: “A qualified enrollee may become an eligible beneficiary if he or she: (a) Is not eligible for long-term services and supports under medicare; and (b) Has been assessed by a health care provider who is in the registry and has determined that the qualified enrollee requires assistance with at least three activities of daily living.”

LTC Comment: Medicare does not cover long-term care, but Medicaid does. Why the omission? Can someone qualify for this program and Medicaid simultaneously? Three ADLs to qualify? Most private LTC insurance requires only two.

HB 1636 Quote: “An eligible beneficiary may not receive more than three hundred sixty-five services days of benefits over the course of the eligible beneficiary's lifetime.”

LTC Comment: Technically, anything over 90 days qualifies as long-term care, but 365 days is a pretty pathetic benefit period.

HB 1636 Quote: “A qualified enrollee's status in the program shall lapse if he or she ceases to be a resident of Washington for a period of at least five consecutive years without paying the long-term services and supports assessment under section 94 of this act. . . . An individual whose qualified enrollee status has lapsed under subsection (1) of this section may restore his or her qualified enrollee status upon resuming residence in Washington and making payment of the long-term services and supports assessment established under section 9 of this act for the equivalent of either: (a) A total of ten years without an interruption of five or more consecutive years; or (b) Three years within a six-year period.”

LTC Comment: Good luck keeping track of all that. This bill should be renamed the “Washington Bureaucrats Guaranteed Employment Act.”

HB 1636 Quote: “Each employer shall deduct from each employee's salary the equivalent of 0.49 percent of the employee's total compensation. The amounts shall be submitted to the department on a timeline determined by the department. The employer shall accompany the amounts with such information as the department determines is necessary to administer the program.”

LTC Comment: LTCI expert Scott Olsen is reported to have said: "Call this what it really is: a tax on the poor and the working class to get them to pay for care that they currently get for free under Medicaid!"

HB 1636 Quote: “The department shall deposit all funds received from employers under subsection (1) of this section into the account created in section 10 of this act. . . . The long-term services and supports trust account is created in the state treasury. All receipts from employers under section 9 of this act must be deposited in the account. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used for the administrative activities and payment of benefits associated with the program.”

LTC Comment: Sounds like another “trust fund” in the mode of those for Social Security and Medicare that include nothing but IOUs for moneys the U.S. government has already spent. And what does this mean: “Expenditures from the account may be used for the administrative activities and payment of benefits associated with the program.” What else can they be used for? This looks like a state slush fund modeled after those that rob Social Security and Medicare to enable excess federal deficit spending.

Well, other than that, this sounds like a great plan. Good luck with it, Washington. Thankfully, I’ve already made my escape to Texas.

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Updated, Monday, February 6, 2017, 9:43 AM (Pacific)

Seattle—

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LTC E-ALERT #17-005: LTC NEWS AND COMMENT

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:

Making Sense Of Tough Long-Term Care Choices
Could Congress Boost Medicaid Long-Term Care Benefits For Some By Curbing Spousal Annuities?
U.S. proposes 0.25 percent hike in Medicare Advantage payments
An action plan to fund long-term care
The surprising link between air pollution and Alzheimer’s disease
House bill could change how Medicaid treats annuities
ACA Medicaid funding rules stink, witness says
Agent Review January Newsletter
Obama administration's report could help GOP justify Medicaid cuts
Who uses social media the most? Not millennials

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Updated, Friday, February 3, 2017, 10:19 AM (Pacific)

Seattle—

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LTC BULLET: MEDICAID PLANNING IN THE BULL’S-EYE

LTC Comment: The new Congress wasted no time confronting three egregious Medicaid eligibility loopholes. Details after the ***news.***

*** THE 17^th ANNUAL ILTCI CONFERENCE, with the theme “Navigating the Future,” will convene March 26-29, 2017 at the Hyatt Regency in Jacksonville, Florida. Organizers report “We have only two booths left for the ILTCI Conference coming up in March, one 10x10 booth and one 6x10 booth. Exhibit booths also come with 2 free admissions and a list of other benefits. We have first timer and non-profit discounts, and a variety of sponsorship options. See the Exhibitor App button … for more details. … If you have any questions or need assistance with registration or exhibit/sponsor selections please contact Christi Trimble at 856-308-0611 or christi@iltciconf.org.” We hope to see you there! ***

*** HIS MILLION-DOLLAR MOM book and movie project gains momentum. Watch LTCI producer and Center friend Ross Schriftman’s TV interview for inspiration and motivation regarding Alzheimer’s care and funding. ***

2/1/2017, “Could Congress Boost Medicaid Long-Term Care Benefits For Some By Curbing Spousal Annuities?,” by Howard Gleckman, Forbes

Quote: “Is Medicaid’s long-term care benefit a zero-sum game where limited resources are shifted from one beneficiary to another? For instance, could the government significantly increase long-term care benefits for some by barring people from using spousal annuities to qualify for Medicaid? Or should resources be expanded to provide all eligible seniors and younger people with disabilities the care they need?”

LTC Comment: Is Medicaid a zero sum game? Pretty much. It’s already crowding out other programs in state budgets. Should we expand resources to cover everyone? Well, sure, there’s plenty of extra revenue out there just waiting to be spent. This author defends expending Medicaid’s scarce resources on ineligible people, lottery winners, and wealthy annuitants. He’s also pushing for a new, compulsory, payroll-financed government long-term care program. They say the difference between a neurotic and a psychotic is that one builds castles in the sky while the other lives in them. Your call. ***

LTC BULLET: MEDICAID PLANNING IN THE BULL’S-EYE

LTC Comment: Most people think of Medicaid as a means-tested public assistance program. In a word, welfare. But as LTC Bullets readers know, it’s not that simple. Individuals with substantial incomes and assets can and do qualify easily for Medicaid’s most expensive long-term care benefits if and when they need care. We’ve published 143 Bullets about the practice of “Medicaid planning,” AKA artificial self-impoverishment to qualify for benefits, here.

Easy access to Medicaid after care is needed has serious consequences for the long-term care service delivery and financing system. It desensitizes the public to LTC risk and cost. It discourages early and responsible planning for future care needs. It impedes the market for home care by making nursing facility care virtually free. It crowds out the market for private long-term care insurance. It overloads Medicaid with too many non-needy recipients. It benefits the affluent while diverting resources from the poor. It bloats Medicaid costs and consumes resources that might otherwise go for education, roads, and other state financial priorities.

So what has the federal government done about this problem? Not much in the last decade. The Bush 43 Administration gave us the Deficit Reduction Act of 2005, which capped Medicaid’s home equity exemption, extended the transfer of assets look-back to five full years, and discouraged the then-commonplace “half-a-loaf” divestment strategy. From 2009 to 2017, the Obama Administration did virtually nothing to protect Medicaid long-term care benefits for the needy. The Centers for Medicare and Medicaid Services under President Obama left many routine and several outrageous eligibility loopholes unaddressed.

But last November’s political upheaval has changed the outlook for legislation to curtail Medicaid benefits abuse. The Trump Administration and House Speaker Paul Ryan are talking about a “Better Way” to do health care financing, including Medicaid. Block granting the program, capping federal costs, and giving states more flexibility to experiment with creative eligibility and service delivery options are all under serious consideration. But so are some specific measures to curtail some of the worst Medicaid planning abuses.

On Wednesday, February 1, 2017, the House Energy and Commerce Committee’s Subcommittee on Health convened a hearing titled “Strengthening Medicaid and Prioritizing the Most Vulnerable.” Check out the witnesses’ statements, text of new legislation under consideration and watch the full hearing here. It addressed specifically three new proposed statutes that tackle long-standing Medicaid eligibility loopholes. These are:

The Prioritizing the Most Vulnerable Over Lottery Winners Act, by Representative Fred Upton
The Verify Eligibility Coverage (VECA) Act, by Representative Bill Flores
H.R. 181, The Close Annuity Loopholes in Medicaid (CALM) Act, by Representative Markwayne Mullin

As their titles imply, these proposed laws would close Medicaid eligibility loopholes that allow big lottery winners, undocumented immigrants, and wealthy annuity buyers to qualify for Medicaid long-term care benefits. Discussion drafts of each of the proposed statutes are available here.

We’re especially fond of the effort to stop abuse of Medicaid-compliant annuities. These financial work-arounds enable wealthy couples to divest hundreds of thousands of dollars, capture large monthly incomes for the community spouse, and qualify the institutionalized spouse immediately for Medicaid-financed care. They dodge the asset transfer rules and evade otherwise mandatory estate recovery. We’ve had this abuse in our sights for a long time, having published the following LTC Bullets about the problem:

LTC Bullet: Annuity Blues, Friday, November 15, 2013

LTC Bullet: Medicaid Planning—The Rest of the Story, Friday, February 7, 2014: Also applies to the Medicaid planning problem.

LTC Bullet: How to End Medicaid Annuity Abuse, Friday, February 28, 2014

LTC Bullet: Medically Underwritten Annuities for LTC, Friday, May 15, 2015; the good LTC annuities

LTC Bullet: Medicaid Annuity Abuse: A Case Study, Friday, June 5, 2015

LTC Bullet: LTC Annuities: To Get or Avoid Medicaid?, Friday, June 19, 2015

Bottom line, the prospects are looking up for giving Medicaid LTC benefits back to the poor and encouraging everyone else to plan early, save, invest or insure for LTC risk and cost. Stay tuned for more as new developments occur. We’ll keep you posted.

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Updated, Monday, January 30, 2017, 9:32 AM (Pacific)

Seattle—

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LTC E-ALERT #17-004: LTC NEWS AND COMMENT

LTC E-Alerts: Once a week, we compile our daily LTC Clippings into a summa