 LTC Bullet: A Framework for Thinking about Medicaid and Long-Term Care Friday, October 15, 2021 Seattle-- LTC Comment: What would a bare-bones outline of the long-term care problem and its solution look like? Read on after the ***news.*** *** LTC DISCUSSION GROUP has launched their new and improved website. Browse it, find presentation materials from prior sessions, get added to their mailing list, submit questions or topic ideas for future sessions, or heaven forfend, even unsubscribe from future “Save the Date” notifications. Check the Group’s new You Tube channel for presentation videos starting with the September 2021 meeting that we highlighted in LTC Bullet: LTC Prevention is Better than Cure. Save the date for the LTC Discussion Group’s October 19th meeting on “Direct Care Workforce.” *** *** AMADA SENIOR CARE has retained Stephen Moses to deliver the keynote address at their annual franchise conference in Dana Point, CA on October 27. Amada is a home care provider that specializes in helping people get everything they’re entitled to from their long-term care insurance policies. The company also joins the Center for Long-Term Care Reform as a Bronze Member for the coming year. *** *** RECENTLY PUBLISHED ARTICLES by Steve Moses: In addition to the columns listed below, Steve has another article accepted for publication soon and a second out for query. Watch for them. “LTC Irony” scheduled for the November issue of Broker World. “What’s better for senior living? The market or government?” “Long-Term Care’s Problems Are Bad, Getting Worse, but Fixable,” by Stephen A. Moses, McKnight’s LTC News, October 1, 2021. “Should Medicaid Protect $8 Trillion from Private Senior Living Costs?” for McKnight’s Senior Living, August 9, 2021 “The InLTCgentsia” for Broker World’s August 2021 issue. “Panel Gives States Pass in Collecting Assets for Medicaid Long-Term Care,” by Stephen A. Moses, Health Care News, July 2021 (PDF version.) “Government Violates the Long Term Care Social Contract to Your Detriment, by Stephen A. Moses, Broker World, June 2021. (PDF version.) “President Biden, tear down this wall,” by Stephen A. Moses, McKnight’s LTC News, June 23, 2021 (PDF version.) “Using Medicaid to protect inheritances,” by Steve Moses and Brian Blase, TheHill, June 10, 2021. (PDF version.) “LTC financing: Be careful what you WISH for,” by Stephen A. Moses, McKnight’s Senior Living, June 7, 2021. (PDF version.) “The social contract for long-term care,” guest column by Stephen Moses for McKnight’s Long-Term Care News, May 17, 2021. (PDF version.) Find many more articles like these,
plus scores of speeches and reports covering 35 years of long-term care
policy analysis at
www.centerltc.com. *** LTC BULLET: A FRAMEWORK FOR THINKING ABOUT MEDICAID AND LONG-TERM CARE LTC Comment: Long-term care financing is complicated. Most analysts bewail long-term care’s problems—excessive dependency on family caregiving, institutional bias, caregiver shortages, inadequate funding, etc.—and then, without analyzing or explaining why these problems exist, they reflexively prescribe more government financing and regulation. Ironically, they recommend more of what arguably caused the problems in the first place. The explanation of why long-term care is so dysfunctional requires complex research, analysis, evidence, and reasoning. Our monographs, Medicaid and Long-Term Care and How to Fix Long-Term Care Financing, provide that. But they contain too much data and analysis to absorb all at once. So below, for brevity and clarity, I present only the basic argument. It leads in a very different direction than the anti-democratic, compulsory, payroll-funded social insurance plans (like WA Cares Fund and the federal WISH Act) on which so many analysts and advocates have come to agree. A Framework for Thinking about
Medicaid and Long-Term Care The big picture: About 70% of people will require assistance with activities of daily living due to age. But only 25% are likely to experience expenses that are potentially catastrophic. The purpose of insurance is to replace the small risk of a catastrophic loss with the certainty of an affordable premium. A one in four chance of a catastrophic loss is an insurable risk. So private insurance against long-term care risk should be a promising market. That is why over 100 companies sold the product at one time. But only a dozen still do. Why? People only buy insurance against real risk from which they can see the dire consequences of being unprotected. That condition does not exist with long-term care. Why? Most catastrophic long-term care costs are paid for by Medicaid, Medicare, the VA, and other smaller public programs. Add “spend-through” of Social Security and other income Medicaid recipients must contribute toward their care and we account for 90% of total LTC costs without touching any savings. But don’t people have to spend down their wealth before they become eligible for Medicaid? That is the conventional wisdom in most academic and popular articles but it is untrue. To qualify for Medicaid people do need to meet ostensibly low income ($723/month) and asset ($2,000) limits. But those limits are misleading because … Medicaid subtracts private medical and long-term care costs from income before determining eligibility. Rule of thumb: income below the cost of a nursing home, say $7K/month, qualifies. Most large assets are exempt including $603K to $906K of home equity plus without a $ limit one vehicle, burial expenses, personal belongings, a business, term life insurance, IRAs, etc. Non-exempt assets are easily converted to exempt status. Medicaid eligibility workers routinely advise applicants how to use countable assets to purchase exempt resources in order to qualify. Beyond these already generous financial criteria, Medicaid planning attorneys qualify much wealthier people for Medicaid LTC using special trusts, annuities, and half-a-loaf strategies. If most people aren’t at risk for catastrophic long-term care expenses, it makes sense that they are not sufficiently concerned about them to plan ahead, much less buy expensive insurance. Yet, even experts still believe that all we need to do is educate the public about long-term care and they’ll take it seriously. But telling people they’re at risk when they’re not doesn’t work. Consumers have been barraged for decades with warnings from government and the media about potentially catastrophic long-term care spend down. They still ignore the risk. Why? Most people don’t know and don’t care who pays for long-term care. Many think incorrectly that Medicare pays. It doesn’t, but as explained above Medicaid does. Medicaid enables denial about long-term care risk by paying for most expensive long-term care after the care is needed and long after the risk has become privately uninsurable. It works like this. The public does not see large numbers of people being wiped out financially by long-term care. Why? There is no empirical evidence that this actually occurs. That’s why the academic literature on this topic never cites hard evidence. There is none. How can that be? As previously explained, the vast majority of catastrophic long-term care expenses are paid by sources other than personal wealth, mostly government programs. So here’s the anomaly and the explanation. People don’t know who pays for long-term care, but they ignore the strident warnings about catastrophic spend down anyway, because … They are not confronted with evidence that it actually happens, so they casually ignore the risk until they need expensive long-term care and when they do they slide easily onto Medicaid. But don’t middle class and affluent people want to avoid Medicaid, which has such a poor reputation for nursing home bias and deficient quality? Two points: Once care is needed the senior is usually out of the picture due to physical or mental incapacity. So, adult children, who are heirs with a financial conflict of interest, are making the decisions. Second, Medicaid planners advise affluent clients not to worry about Medicaid’s poor reputation. They promise access to the best facilities that have only a few Medicaid beds. How? The trick is to hold back enough “key money” to get those facilities to roll out the red carpet. Nursing facilities receive half again as much from private payers as from Medicaid. So anyone who can pay privately for a while is welcomed into the nicest places. The tragedy is that poor people dependent on Medicaid end up in the nastier nursing homes. What should be done? They key to fixing what ails long-term care in the USA is to wake up consumers to the real risk and cost while they are still young, healthy and affluent enough to plan, save, invest or insure. To do that, Medicaid must stop exempting seniors’ biggest asset, the home, so that aging Americans and their heirs know long-term care is a real risk for which they need to prepare. With home equity finally at risk for the first time, more people will worry about long-term care and insure against the risk. But those who don’t insure will have to tap home equity by means of a reverse mortgage or some other form of commercial or intra-family home equity conversion. As more people have to use home equity, more will want to avoid that result by insuring, thus creating a positive incentive to insure and replacing the current perverse incentive to go without. Over a very few years huge new private revenues from home equity conversion and private long-term care insurance will flow into home care, assisted living and nursing home providers. The new private revenue at much higher market rates than Medicaid or Medicare pay will improve access and quality across the whole continuum of care for rich and poor alike. What prevents this solution from being implemented? The main obstacle is political sensitivity. People have a visceral attachment to their homes. Politicians benefit by providing “free” goods and services in exchange for votes. Removing or vastly limiting Medicaid’s home equity exemption is not politically feasible … yet What is important now is to be ready with the right analysis and proposals when the political calculation changes as the result of a major economic collapse coming in the 2030s. Why then? Social Security’s “trust fund” runs dry in 2034; Medicare’s, in 2026; Medicaid has no phony savings. Boomers start to turn 85 in 2031, the critical age for rising health and LTC expenditures. This perfect fiscal and demographic storm will make the solution to long-term care financing possible. But what must be our focus in the meantime? Defense. We need to defend what remains of Medicaid’s integrity as a means-tested public assistance program. That means opposing MACPAC’s proposal to make estate recoveries voluntary. It also means opposing the increasingly popular proposals by academics, advocates and politicians to impose new, compulsory, payroll-funded social insurance programs for LTC. Job one now is “do no harm.” Oppose bad programs like the WA Cares Fund and the federal WISH Act while we defend and strengthen Medicaid eligibility limits and estate recovery. |