Long-Term Care ... or the Things You Think About When Retirement Looms
Among the things one thinks about, or should think about, as retirement looms is long-term care... and perhaps more importantly when you’re in your 50s, long-term care insurance.
As friends of The Heartland Institute and visitors to Freedom Pub know, Heartland cofounder Joe Bast and I are planning to step down from our day-to-day roles at Heartland in 2018. We have named a new president for Heartland, Dr. Tim Huelskamp (Joe remains CEO), and I’m working with Heartland staff who will take over my responsibilities.
Among the things one thinks about, or should think about, as retirement looms is long-term care ... and perhaps more importantly when you’re in your 50s, long-term care (LTC) insurance.
With perfect timing, along comes Stephen Moses, president of the Center for Long-Term Care Reform, who sent me his latest report, How to Fix Long-Term Care Financing. The paper was published by the Foundation for Government Accountability and underwritten by a contribution from The Milbank Foundation for Rehabilitation, which should be especially thanked for its support of this valuable project.
Moses’s report is focused on the parasitic relationship between LTC and Medicaid. He doesn’t call it that, but it’s clear from his report that LTC is a parasite on the Medicaid program—and vice versa.
First, consider LTC as the parasite. Medicaid is the main funder of LTC—not only for the poor, but for middle-income and affluent individuals as well. Contrary to popular belief, Medicaid does not require impoverishment to qualify for LTC benefits. Moses explains beneficiaries can have virtually unlimited income; virtually unlimited assets are exempt; and widely known “Medicaid planning” techniques make benefits available to nearly anyone who wants to qualify and can afford financial planners and lawyers to walk them through it.
As a result, Moses wrote, “Although Medicaid was intended to serve only the truly needy, eligibility expansions and loopholes have turned the program into a middle-class entitlement.” And that means fewer resources are available for the safety net Medicaid was intended to be. It also means taxpayers are paying more than they should for the LTC component of Medicaid.
But Medicaid is also a parasite in this relationship, doing serious damage to long-term care in the United States. Moses explains the parasitic life cycle this way:
In the 1960s, Medicaid LTC made nursing home care virtually free, locking in an institutional bias and crowding out a nascent privately financed market for home care.
At the same time, Medicaid reimbursed LTC facilities at less than the cost of providing care, pretty much guaranteeing there would be access and quality problems.
That poor quality of care resulted in lawsuits and massive financial penalties for care providers, further undercutting access and quality care.
And that’s just the effect on the LTC industry itself. Medicaid LTC also has done damage to the fundamental individual responsibility for planning for one’s future LTC needs:
Medicaid LTC benefits are available after the fact—think “guaranteed issue” here. As is true with health insurance for those who are already sick, after-the-fact availability of LTC discourages planning and has crippled the market for private LTC insurance.
Medicaid LTC discourages the accumulation of wealth and savings by the poor, who are less likely to employ lawyers and financial planners and thus less able to take advantage of sophisticated techniques for gaming the system.
At the same time, Medicaid LTC discourages responsible planning by middle-income and affluent individuals—persons whose LTC needs shouldn’t be paid for by taxpayers.
And thus the two parasites feed off each other—and not in a good, symbiotic way.
Those of you familiar with Heartland’s work know our policy analysts are perfectly comfortable with the notion of protecting assets for our heirs. That’s why they support repeal of the federal estate tax.
But this is different. It is not legitimate to protect assets for our heirs and then expect taxpayers to pay the price for our care as we age. Heirs are not the only reason we accumulate savings and wealth: We also do that to enjoy our retirements and essentially self-insure for our own future needs, including long-term care.
Moses describes how reforming Medicaid will change the nature of the relationship, preserving Medicaid LTC for the needy and encouraging individual responsibility on the part of those who can afford to be responsible.
A key aspect of this is to have Medicaid stop exempting seniors’ largest asset: home equity. As I was reading his paper, I noted in the margin, “Bite the bullet, folks!” What makes you think it’s OK to protect that asset for your heirs and at the same time expect taxpayers to support you in your old age?
Moses also recommends closing the eligibility loopholes that lawyers and financial planners take advantage of for their clients, at the expense of the poor for whom the Medicaid safety net was intended. And he concludes with a policy recommendation Heartland’s scholars have long supported: block-granting Medicaid. Why? Because doing so would allow the states, the 50 laboratories of democracy, to experiment with innovative ways to ensure taxpayer-funded LTC benefits are available only to those who truly need them.
“Regardless of the approach or the specific methods employed,” Moses wrote, “if Medicaid is to do a better job of caring for the poor, it will have to exercise tougher love for the prosperous.”
And since Joe and I are blessed to count ourselves among those who should be taking responsibility for their own future needs, doggone it, my next email will be to our trusty insurance broker. Your next steps should be to get in touch with yours—and to read Steve Moses’s paper.
[First published at RedState.]
* * *Diane Carol Bast has worn many hats at The Heartland Institute … and is gradually giving them over to capable people.