LTC Bullet: My LTC Policy Wish List

Friday, December 6, 2024

Seattle—

LTC Comment: WA Cares survived but national politics is upside down. What’s happening and how can we make the most of it? My wish list after the ***news.***

*** REGISTRATION IS OPEN for ILTCI ’25. The Inter-Company LTC Insurance Conference will convene March 9-12, 2025 at the Philadelphia Marriott Downtown in Philadelphia, PA. Register here. Organizers say “Our agenda includes numerous educational sessions over two days across seven tracks with ample time for networking and reconnecting with colleagues.

We still have room for exhibitors and sponsors! Please contact us at info@iltciconf.org if you are interested in either opportunity to showcase your products and services to our attendees.” ***

*** 12/2/2024, “What’s next for long-term care?,” by Stephen A. Moses, McKnights LTC News

Quote: “Most of long-term care’s problems — including impaired access and quality, institutional bias, interminable home-care waits, paid caregiver shortages, and excessive dependence on unpaid family and friends — are the direct result of too much reliance (61% of $400 billion in 2022 LTC spending) on Medicaid’s parsimonious reimbursements (70% of private-pay rates) and the Centers for Medicare & Medicaid Services’ overbearing regulation (such as uncompensated staffing mandates). This LTC market status quo has pertained for decades. But America is experiencing a political inflection point. A rare opportunity looms to move away from central planning toward freer markets, from government dependency toward individual responsibility, and from heavy-handed regulation toward unfettered competition. What would a LTC marketplace reflecting the full implementation of those changes look like?”

LTC Comment: Click through and read on for my formula to fix long-term care once and for all. ***

LTC BULLET: MY LTC POLICY WISH LIST

LTC Comment: As we close out 2024, like it or lump it, big changes are afoot. Reminds me of the definition of “crisis” that JFK popularized: “danger and opportunity.” As we enter a tumultuous period of political and economic change, it seems like a good time to imagine (1) what we would like long-term care (LTC) to look like in the future and (2) how we might achieve that vision.

Imagining the ideal LTC service delivery and financing system is the easy part. We envision every aging American having affordable access to high quality extended care in the venue of their choice—home care, assisted living, or a well-staffed nursing home when medically necessary. The sad fact is that today’s LTC looks nothing like that ideal. See “Long-Term Care: The Problem” for details.

The tough part of achieving our LTC vision, the part that has eluded scholars, think tanks, and special commissions for decades, is to reconfigure incentives in the LTC marketplace so that most people place a high enough priority on LTC planning and they prepare early to be able to pay privately for care when they need it. Long-Term Care: The Solution” explains how to make that happen.

Today, I want to address a different question. What would the LTC marketplace need to look like to achieve the elusive ideal LTC service delivery and financing system? Let’s take it step by step.

First and foremost, everyone should pay the same market-based price for LTC. No more Medicaid rates below the cost of care that have to be balanced by (i.e., cost-shifted into) exorbitant private-pay rates that regular people cannot afford. That single distortion ramifies through the whole LTC market causing access and quality problems and caregiver shortages due to inadequate compensation. It causes excessive reliance on institutional care (which people would rather avoid) to save the government money instead of the home care people prefer, but which Medicaid cannot afford (without long waiting lists). So, let Medicaid pay market rates for LTC. That would relieve the many problems the program’s meager reimbursement rates have caused.

But, “whoa,” all the experts will respond. Where will Medicaid come up with all the extra money to pay market rates? I say “no extra money is needed. Less will suffice in fact.” The problem is not that Medicaid spends too little, but that it covers too many enrollees. That’s not fixable overnight, but it is fixable. Here’s the underlying problem. The Social Security Act authorized Medicaid to provide LTC to individuals “whose income and resources are insufficient to meet the costs of necessary medical services … .” That open-ended mandate to fund LTC for anyone who cannot afford it overwhelmed Medicaid with too many recipients and created a moral hazard by desensitizing the public to LTC risk and cost. Thus, few people plan early for LTC and most depend on Medicaid if they encounter high LTC costs late in life.

From the start, Medicaid defined the inability to afford LTC in such a way that no one could afford it and nearly everyone qualified for assistance. High income was no problem because Medicaid deducts private medical and LTC costs from income before applying a “low-income” limit. High assets don’t interfere because most large assets, such as home equity and IRAs, are exempt. Any remaining countable assets are easily removed by using them to purchase exempt assets as explained in Medicaid's $100+ Billion Leak.

So, Medicaid policy sent the message that “you don’t need to worry about LTC. If you ever need it, government will provide.” That message was never explicit. In fact, consumers were urged to insure for LTC so they would not lose their life savings to the cost of LTC. But because that risk was never real and most people ended up receiving paid care if and when needed, the thoroughly deficient Medicaid-dominated system prevailed and private LTC planning languished.

Here’s what needs to change to end this vicious downward cycle. We must eliminate the ways middle class and affluent people qualify for Medicaid LTC benefits while preserving wealth. These are the most critical measures to pursue:

Stop allowing the purchase of exempt assets to spend down unlimited resources artificially. Instead, treat asset spend down the same as income spend down, which is limited to deducting actual, documented private medical or LTC expenditures.

Bring seniors’ $14 trillion of home equity into the LTC financing system by eliminating or vastly reducing Medicaid’s home equity exemption. At its current level between $713,000 and $1,071,000, Medicaid’s misplaced generosity diverts nearly all home equity away from LTC funding, enough alone to solve most of LTC’s many access and quality problems.

Stop Medicaid Asset Protection Trusts and Medicaid Compliant Annuities from diverting vast sums of private wealth from LTC spending into taxpayer-financed Medicaid expenditures. These legal gimmicks, used exclusively by the affluent clients of Medicaid planning specialists, should be illegal.

Medicaid’s 5-year asset transfer look-back is too short to discourage intentional self-impoverishment to qualify for LTC benefits. Expand it to 20 years. As home ownership and transfers are publicly recorded by county assessors and recorders, a 20-year look back rule would be easily administered. It would end one of the most commonly recommended early LTC planning methods.

End systemic LTC racism. Today, affluent Medicaid planners’ clients access the best Medicaid facilities and services to the exclusion of needier groups, including racial and socio-economic minorities, by using “key money” to purchase red-carpet access the less privileged cannot afford.

Give Medicaid back to the vulnerable aged and disabled by reversing the program’s new focus on able-bodied, working-age adults—with a much higher federal reimbursement percentage for these enrollees.

Inform the public about the loss of Medicaid as a late-life wealth preserving safety net for the middle class and affluent. Establish and promulgate new LTC planning goals for consumers to achieve no later than age 65 as a condition for later Medicaid help with catastrophic costs.

Allow states to experiment with creative ways to do more with less by encouraging and approving waivers that exchange federal matching fund limits for more state-level LTC policy flexibility.

Closing LTC Comment: Achieving the ideal LTC service delivery and financing system is not as difficult as most believe. All that’s needed is to give LTC the priority it deserves. Eliminate Medicaid as a late-life wealth preserving welfare-based safety net. That will incentivize people to draw on sources of wealth they are accumulating anyway—home equity, retirement savings and life insurance—to fund LTC if needed. With those sources of wealth at risk for the first time, private LTC insurance in all its many forms will revive as a major source of LTC financing. Vast new sums of private funding for LTC at market rates will revitalize the system. To fix LTC once and for all this is what must be done.