LTC Bullet: Begging the LTC Question

Friday, May 27, 2022

Seattle—

LTC Comment: LTC researchers employ logical fallacies copiously after the ***news.*** [omitted]
 

LTC BULLET: BEGGING THE LTC QUESTION

LTC Comment: Long-term care analysts routinely ignore, diminish and/or misrepresent the impact of Medicaid planning (artificial self-impoverishment to qualify for benefits) on the long-term care market. Here’s an example taken from Richard W. Johnson and Melissa M. Favreault, “Economic Hardship and Medicaid Enrollment in Later Life: Assessing the Impact of Disability, Health, and Marital Status Shocks,” HHS/ASPE/BHDAP, January 31, 2021. For the full context, please review the source before reading the following critique. 

“Begging the LTC Question”
by
Stephen A. Moses

Begging the question is the logical fallacy of assuming as a premise of your argument the conclusion you want to prove. You can find examples of such circular reasoning here and all over the popular media. But begging the question should not appear in serious scholarship.

Yet here’s a glaring example from two leading long-term care scholars: “Medicaid enrollment is a reliable indicator of economic hardship because people qualify only if they have very low income (after covering health care costs) and few assets.” (Johnson and Favreault, 2021, p. 10)

Hmmm. Medicaid indicates economic hardship because you must have an economic hardship to qualify. That statement evokes another flaw in reasoning, the opposite of a fallacy, something that is always true automatically. A tautology is “a phrase or expression in which the same thing is said twice in different words.” It tells you nothing new.

Besides errors of logic and reasoning what else is wrong with the argument that Medicaid indicates economic hardship because you must be poor to get it? For one, it is false. People can retain substantial assets in exempt form and still receive Medicaid. To be fair, Johnson and Favreault acknowledge this fact elsewhere in their paper: “Countable assets exclude the value of the home and such things as automobiles, household goods, the surrender value of life insurance, and burial funds.” (p. 7)

But if Medicaid recipients can retain all those things, is it correct to say they must have “few assets” to qualify? The vast majority of seniors’ assets are held in these exempt forms. Whatever else they own, such as stocks, bonds, or cash, is easily converted from countable to noncountable status. Medicaid planners provide long lists of exempt assets and encourage their affluent clients to reduce their countable wealth by purchasing them. That’s the commonest way savvy people qualify for Medicaid without spending down for care. It’s legal but violates what public policy intends and what analysts like Johnson and Favreault assume occurs.

These authors do pay lip service to the idea that some people find ways to qualify for Medicaid long-term care benefits without spending down their wealth for care. For example: “Despite concern that some older adults game the system by transferring wealth to their children to qualify for Medicaid, there is little evidence that this practice is widespread … . (p. 8) But here they employ another logical fallacy. “A straw man argument attacks a different subject rather than the topic being discussed … The purpose of this misdirection is to make one's position look stronger than it actually is.”

Asset transfers are a significant, but comparatively minor form of Medicaid planning. By focusing specifically on asset transfers instead of generally on Medicaid planning, Johnson and Favreault divert attention from the far more commonly used methods of artificial self-impoverishment. These include the purchase of exempt assets described above and the use of Medicaid Asset Protection Trusts, Medicaid Compliant Annuities, reverse half-a-loaf strategies, and myriad other techniques including the ones on this long list. Medicaid planning by one or more of these methods is the rule, not the exception among Medicaid long-term care applicants who are not poor when they apply.

By ignoring the evidence of widespread Medicaid planning and disregarding the vast legal literature devoted to explaining and promoting it, Johnson and Favreault employ yet another logical fallacy. “An appeal to ignorance (also known as an ‘argument from ignorance’) argues that a proposition must be true because it has not been proven false or there is no evidence against it.” In other words, people must be spending down into impoverishment on long-term care, because there is no evidence they don’t. But the onus of proof is on whoever asserts the positive. Neither Johnson and Favreault nor others in the LTC intelligentsia ever adduce evidence of actual, as opposed to artificial, spend down. The truth is that people with substantial assets who actually spend their wealth for health or long-term care do so either voluntarily or out of ignorance of Medicaid’s generous and elastic financial eligibility rules.

But what about income. The one thing everyone knows about Medicaid is that it requires “low income.” Here’s Johnson and Favreault: “Because people qualify for Medicaid only if they have virtually no assets, except for a home, and very little income, receipt of Medicaid benefits is a strong indicator of financial vulnerability. … A single SSI beneficiary without earnings who does not receive Social Security or other income, like a state supplement could receive no more than $771 [$841 as of 2022] in monthly income in 2019 (equivalent to $9,252 per year), well below the FPL [Federal Poverty Level].” (p. 7)

Unlike their less intellectually honest scholarly colleagues, Johnson and Favreault do clarify that having “very little income” to qualify for Medicaid actually means applicants can have unlimited income as long as their private health care expenses are high enough or a Miller income trust is in place.

Many states account for individuals’ health care spending when determining Medicaid eligibility by subtracting applicants’ out-of-pocket costs for medically necessary services and supplies from their countable income. This adjustment essentially allows people to “spenddown” their income until they qualify for Medicaid. Other states achieve similar outcomes by allowing applicants to assign that portion of their income that exceeds the Medicaid income threshold to a special trust used to help cover service costs. The state receives any funds remaining in these trusts after a Medicaid enrollee’s death, up to the amount the state paid in Medicaid benefits. (p. 7)

Johnson and Favreault close their paper with this non sequitur: “Serious LTSS needs create economic hardship for many middle-class older adults because paid LTSS is expensive and third-party reimbursement is rare for people with too many financial resources to qualify for Medicaid.” (p. 19) Actually, third-party reimbursement is commonplace for people with too many financial resources to qualify for Medicaid if they employ the methods of artificial self-impoverishment described in this column or consult an elder law attorney with Medicaid planning expertise.

Unless or until policy makers wake up to this reality and fix it, Medicaid will continue to be the dominant payor for low cost long-term care of dubious quality in the United States. Private financing of top rate care at market rates will remain the exception instead of the rule.