LTC Bullet: The Medicaid Spend Down Bullets

Friday, June 16, 2023

Seattle—

LTC Comment: Does it matter whether Medicaid spend down actually occurs? We’ve explored and answered that question and covered related issues in 25 years of LTC Bullets. Find them all archived chronologically and by subject here.
 

LTC BULLET: THE MEDICAID SPEND DOWN BULLETS

LTC Comment: The fallacy that eligibility for Medicaid LTC benefits requires catastrophic spend down of life savings is endemic in the academic and popular literature on long-term care financing. Most of the Center for Long-Term Care Reform's 1,358 LTC Bullets published since 1998 bear on identifying and correcting that error in one way or another. Following is a small sample of Bullets that debunk and/or explain the consequences of assuming falsely that Medicaid forces LTC spend down. Bottom line, if Medicaid really did require asset spend down, the public would not be so blasé about LTC risk and cost; more people would plan ahead for LTC by saving, investing or insuring; much more private revenue at market rates would flow through to LTC providers who could then provide better care access and quality; fewer people would need public welfare as a last resort LTC payer; and families would feel the burden of caregiving less with far more elders prepared to receive paid home care. For our long series of LTC Bullets correcting errors about LTC financing made by financially well-endowed think tanks, advocacy organizations, government agencies and the media that broadcast their messages, see LTC Bullet: Still Standing Guard.

The Medicaid Spend Down Bullets

LTC Bullet: How to Unleash Long-Term Care Insurance and Assisted Living, June 15, 1999
LTC Comment: We highlighted the importance of Medicaid spend down in this early Bullet. “A public financing system should be implemented that guarantees every American access to quality care at the appropriate level in the private marketplace, but requires the quid pro quo that financial assistance in obtaining such care constitutes a dollar-for-dollar spend down of one’s estate assets payable after death. Only with this kind of system can an incentive be created that is strong enough to persuade the financially able to take responsibility for themselves so that publicly financed programs can be saved to serve those who cannot provide for themselves.”

LTC Bullet: HCFA Data Easily Misconstrued, February 23, 2000
LTC Comment: This LTC Bullet disproved the common notion “that out-of-pocket nursing home expenditures are destroying the life savings of huge numbers of older Americans.” It became the model for our 2004 to 2022 series titled “So What if the Government Pays for Most Long-Term Care?” Find those 19 annual updates of newly reported CMS data here by searching for “So What?”

LTC Bullet: "Nursing Home Care Virtually Free For Life," May 7, 2002
LTC Comment: While researchers claimed LTC costs wiped out life savings across the U.S, this Bullet showed how easy that tragic spend down outcome was to avoid. “What follows is a transcription of excerpts from a professionally produced and mass-distributed videotape. The tape is an advertisement for a man and his company who promise ‘nursing home care virtually free for life.’ This financial miracle worker proudly proclaims that he is not an attorney, a financial planner, nor, perish the thought, an insurance agent.”

LTC Bullet: New LTC Expenditure Data Provide Clues to Low LTCI Sales and LTC Facilities' Financial Woes, January 14, 2003
LTC Comment: This is another precursor of what became the “So What?” series described above. It explains how the lack of real Medicaid LTC spend down accounts for dysfunctions in the LTC service delivery and financing system. “Heads up! We're about to explain why long-term care insurance sales have been disappointing and why the nursing home and assisted living industries are in such a woeful financial condition. The explanation is complicated, but hey, if it were simple, everyone else would have figured it out already.”

LTC Bullet: GAO on TOA Underwhelms, October 5, 2005
LTC Comment: We observed that the Government Accountability Office's "letter report" titled "Medicaid: Transfers of Assets by Elderly Individuals to Obtain Long-Term Care Coverage" “disappoints in many ways. It asked the wrong questions. It used the wrong methods. It searched the wrong data. And, consequently, it provides little new information of value.” For example, its “trite observation that people ‘can’ quickly spend down for nursing home care begs the question ‘Do they?’ Answer: there is no evidence of widespread nursing home spend down. All but 10 to b15 percent of total nursing home costs are accounted for by direct or indirect government financing and personal income, not assets.”

LTC Bullet: Who Still Gets Medicaid LTC Without Spending Down?, April 20, 2006
LTC Comment: Even after the Deficit Reduction Act, the vast majority of seniors who need long-term care can get it from Medicaid without spending down their own assets for care. The DRA limited home equity for the first time and extended the lookback period for asset transfers to five years. But the home equity limit it imposed ($500,000 to $750,000) excludes almost no one; the five year lookback is too short to make a difference given the slow onset of Alzheimer’s Disease; and most people qualify for Medicaid LTC benefits without spending down wealth anyway based on the program’s generous and elastic financial eligibility rules. 

LTC Bullet: Spousal Refusal Robs Taxpayers and the Poor, December 14, 2010
LTC Comment: Medicaid financial eligibility rules are so generous that most people qualify without using Medicaid planning techniques to avoid spending down their savings. But some married couples with even higher income and assets dodge even those lenient rules to shelter much more wealth. This Bullet describes the “squalid practice” of “spousal refusal” used mostly in New York and Florida.

LTC Bullet: Nursing Home Spend Down Misunderstood and Late-Breaking LTCI Industry News, July 20, 2012
LTC Comment: A recent Employee Benefit Research Institute (EBRI) study that claims nursing home stays are wiping out Americans’ savings is based on a fallacy and mistaken. Author Sudipto Banerjee assumes without evidence that people must and do spend down their life savings for long-term care before they become eligible for Medicaid LTC benefits. We explain that (1) Medicaid does not require such spend down, (2) there is no evidence in the source cited that it occurs, and (3) how people can and do qualify for Medicaid LTC benefits without spending down their wealth for care.

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. This Bullet explains who, what, when, where and why. It reviews two articles titled “Medicaid Spend Down: New Estimates and Implications for Long-Term Services and Supports Financing Reform” and “Medicaid Spend Down: Implications for Long-Term Services and Supports and Aging Policy,” and concludes “What these papers call ‘spend down’ is nothing more than ‘transition’ from non-Medicaid status to Medicaid eligibility. Neither the articles nor the research they report contain any measurement whatever of money actually spent for health care, long-term care or anything else.”

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, give examples, and critically review an often-cited article that argues the opposite by economist Norma B. Coe titled “Financing Nursing Home Care: New Evidence from Spend Down Behavior,” Tilburg University, 2007.  

LTC Bullet: Retirement Confidence and Asset Spend Down, April 27, 2018
LTC Comment: We review “Asset Decumulation or Asset Preservation? What Guides Retirement Spending?,” by Sudipto Banerjee, in which he challenges the assumption “that retirees will spend down their accumulated assets to fund their retirement needs” and concludes there are several complicated reasons why people decumulate assets slowly in retirement or not at all. We offer a simpler explanation: “[C]atastrophic spend down for long-term care is a myth because Medicaid pays for most expensive LTC, exempts most assets, is easy to get after care is needed without spending down assets significantly and only requires income as the patient’s contribution to the cost of care. Consequently, after decades living in retirement, most people at most levels of wealth, spend down very little.”

LTC Bullet: LTC Bankruptcy, March 4, 2022
LTC Comment: Clare Ansberry describes a heartrending case of long-term care spending unto impoverishment in “Caring for Older Relatives Is So Expensive That Even AARP’s Expert Filed for Bankruptcy” (Wall Street Journal, 2/20/22). We explain that tragic stories like that are very uncommon, because catastrophic spend down to qualify for Medicaid LTC is unnecessary. It is common, although unwise, to extrapolate from such anecdotes to the conclusion that a new government entitlement for LTC is needed.

LTC Bullet: Biased LTC Scholarship Misinforms Policymakers, September 2, 2022
LTC Comment: Many “progressive” analysts equivocate on terms like “impoverishment,” “spend down,” “Medicaid planning,” and “out of pocket.” They do not interview the right people to learn how individuals qualify for Medicaid without spending down personal wealth and they rely on widely accepted data sources that are actually highly dubious in this regard (HRS and AHEAD). Such analysts ignore or misrepresent important facts and emphasize only information that confirms their biases. We analyze a case in point: 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.”

LTC Bullet: LTC Strawman, September 30, 2022
LTC Comment: Critics claim self-impoverishment by high net worth people to qualify for Medicaid is uncommon. But disproving a claim no one has ever made contributes nothing to a crucial conversation about who should qualify for Medicaid LTC benefits, when and under what circumstances. The right question the same critics ignore is “Do most people need to spend down their life’s savings for long-term care before they can get help from Medicaid?” The answer to that question is “No.”

LTC Bullet: What if Most People Don’t Spend Down for Medicaid LTC?, June 2, 2023
LTC Comment: This Bullet (1) shows how people through and including the fourth wealth quintile qualify for Medicaid LTC benefits without spending down for care, (2) debunks the idea that people don’t know how to qualify for Medicaid without spending down or don’t take advantage of Medicaid due to a sense of responsibility or shame, (3) argues that if we take into account wealth people already have that goes unused for LTC, the need to save, invest or insure for this risk would be vastly reduced, and (4) concludes that we do not need a huge new payroll funded compulsory social insurance program for LTC.