LTC Bullet: Cui Bono LTC?

Friday, May 10, 2024

Seattle—

LTC Comment: Who benefits from Medicaid LTC? Ironically, not the poor, but instead, the affluent. We explain after the ***news.***

*** JOIN the Center. If you receive today’s LTC Bullet from a friend or colleague, please consider joining the Center for LTC Reform in your own right. You’ll receive our bi-weekly LTC Bullets and our weekly summaries, LTC E-Alerts, of our daily LTC Clippings. There is no better way to stay abreast of everything happening in the LTC policy space. On top of that, you will support and be part of our mission to reform LTC public policy. Our goal is to encourage responsible LTC planning instead of rewarding consumers’ denial that leads to excessive reliance on Medicaid. Find all the membership options here. Join and contribute here. ***

*** PREMIUM Center members also receive our daily LTC Clippings. Steve Moses scans the academic and popular media. He identifies the reports, data, and articles you need to see to stay at the forefront of professional expertise. He sends an email with the title, author, a link and a key quote followed by his brief analysis of its meaning. Here’s an example:

5/7/2024, “Letting Heirs Bilk Medicaid Is Bad Policy,” by Stephen Moses and Brian Blase, National Review
Quote: “More than a dozen members of the House of Representatives have introduced legislation that would increase federal Medicaid spending by ending “estate recoveries.” The proposal, which was discussed at an Energy and Commerce Committee legislative hearing on April 30, would let individuals secure their inheritances by putting their parents on Medicaid and forcing taxpayers to fund their long-term care (LTC).”
LTC Comment: Repealing Medicaid estate recoveries would be terrible public policy as we explained recently in “LTC Bullet: The Fiscal Imperative and The Moral High Ground of Medicaid Estate Recoveries,” April 26, 2024. Hopefully, this piece in National Review will help to quell that idea once and for all. ***
 

LTC BULLET: CUI BONO LTC?

LTC Comment: Cui bono, “who benefits?,” is a Latin term with two related meanings: 1: a principle that probable responsibility for an act or event lies with one having something to gain; and 2: usefulness or utility as a principle in estimating the value of an act or policy. When it comes to long-term care (LTC), cui bono?

Medicaid dominates America’s LTC service delivery and financing system. Ostensibly, Medicaid benefits the poor and under-privileged most. It has a means test with limits on applicants’ and recipients’ incomes and assets. People with wealth exceeding these limits are supposed to pay for their own LTC until they “spend down” to Medicaid’s low income ($943 per month) and asset ($2,000) standards.

The often stated intent of this system is to ensure that the scarce resources of this Great Society poverty program go primarily to its intended, neediest beneficiaries. But it has another objective as well: to incentivize more affluent people to plan ahead for LTC risk and cost. Surely most people would rather save, invest or insure for LTC than to be forced to expend their incomes and savings until they become impoverished and eligible for Medicaid.

But is this how the system really works? Cui bono? Whom does this system benefit and whom does it hurt the most?

Ironically, Medicaid hurts the poor, its intended beneficiaries, most. They have low incomes and assets at the start. High LTC costs consume what little they have very quickly. Poor people usually lack the advice of lawyers and financial experts. So they do not learn about ways to protect and preserve what they have by circumventing the spend down rules. Once on Medicaid, they tend to receive nursing home care in the least desirable facilities, have reduced access to home and community-based services, and suffer many other deficiencies compared to private-pay patients.

Why is this true? Is Medicaid underfunded? Does it lack the resources to provide care access and quality comparable to what is available to people who pay privately for LTC? I don’t think so. Medicaid LTC is enormously expensive and its expenditures continue to grow steeply every year. What else could explain why such a richly funded program does such a poor job for the people who need it most?

The answer lies in understanding who really benefits most from Medicaid LTC. Medicaid’s supposedly draconian income and asset limits are a myth. Income rarely obstructs eligibility because states either subtract private medical and LTC expenses before they apply a low income standard or they allow income diversion trusts to achieve the same outcome. Nor do assets stand in the way of eligibility for the affluent. Most large assets, such as home equity, a business, and IRAs, are exempt. So people with big incomes and assets actually qualify for Medicaid LTC more easily and with less financial disruption than the poor.

But why would they? Why would people with substantial wealth choose to take advantage of Medicaid’s financial eligibility loopholes to qualify for a welfare program widely considered to be deficient in so many ways? Financial and legal advisers show them how to preserve their wealth, evade “mandatory” Medicaid estate recovery, and gain access to the very best LTC providers, the ones to which poor people have little or no access.

How can they do that? Restructuring high income and assets to qualify a prosperous client for Medicaid LTC and to avoid estate recovery is easy and routine. Getting the same client access to the best LTC Medicaid has to offer requires a second step. Instead of going directly onto Medicaid, the affluent applicant is advised to hold back enough money to pay privately for at least a few months. This “key money” gains access to the best nursing homes and home health providers, who have relatively few Medicaid “beds.” They are less dependent on Medicaid’s extremely low reimbursements, so they are able to provide better care. But they are desperate for private payers at much higher rates than Medicaid pays to make up the difference. So the best facilities welcome all private payers to the exclusion of poor people already on Medicaid. Once in a good facility, federal and state laws prevent residents’ expulsion based solely on a change of payment source from private to Medicaid.

So, bottom line, cui bono from Medicaid LTC? Not the poor. They lose everything quickly. They are shunted into the worst facilities and services Medicaid provides. The affluent get the best of what Medicaid offers. That has been true since Medicaid came on the scene in 1965. It is why so few prosperous people plan early for LTC.

Medicaid tries to do too much for too many and ends up doing worst for the poor and best for the affluent who take advantage. The system is upside down and backwards, but easily fixed by understanding what’s wrong (see “Long-Term Care: The Problem”) and changing policies in ways that follow logically (see “Long-Term Care: The Solution.”)