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The Truth About the Government’s Cost for LTC

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Federal Government's Cost For Long Term Care

Today the federal government pays for 62% of Long term care services to the tune of $130 Billion dollars a year. That’s a problem the federally-appointed Commission on Long Term Care brought to light in their report to Congress. The committe’s goal is to renew discussion on aging challenges and a more fiscally sustainable system. Today that system is broke and unsustainable when it comes to providing services to American seniors.

Unfortunately healthcare, retirement income and long term care are generally dependent upon and deliverd by or administered by the federal government.

I’ve argued for years that Medicaid eligibility should require the use of home equity before qualifying. The commission agrees advocating for tightened eligibiliy for those 62 and older by requiring the consideration of assets that are excluded today and thus removing the opportunity to ‘game’ the system at the government’s expense.



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  1. “Today the federal government pays for 62% of Long term care services to the tune of $130 Billion dollars a year.” And the Reverse Mortgage Program that is “possibly” losing $2.8 – $4.8 billion since inception in 1989 is being very harshly punished. Am I missing something?

    • Steve,

      You cannot be serious. The only HECMs in the MMI Fund which is where all the talk is about losses consists of only those HECMs endorsed after 9/30/2008.

      Medicare helps millions but HECMs? Less than 400,000 HECM endorsements since 10/1/2008 is not many and it is only those less than 400,000 which have produced over $7.4 billion in losses. While the fund was earlier this summer projected to result in a $5.2 billion loss position by HUD executive staff in testimony before Congress, there is the over $2.2 billion taken from other MMI Fund Programs (not HECMs) during fiscal 2010 and 2010 offsetting that $7.4 billion negative net position.

      Besides that you must look at the required capital reserves for the MMI Fund programs and that will total about another $2.5 billion in funds needed by fiscal year end. So the real position of less than 400,000 HECMs in the MMI Fund is about $10 billion short of their statutorily required capital reserve requirement.

      Like many in the industry who try to confuse HECM payouts with mitigating Medicaid expenditures, there is absolutely no evidence backing that position. There are conjecture and anecdotes but little else backing that supposition. That is hardly objective evidence.

  2. Gaming the system?
    Medicaid RULES, under the spousal impoverishment act, allow the stay at home spouse to remain in the exempt home for the rest of their lives but Medicaid has the right to a priority lien position under the estate recovery provision of the act.
    This means they can and do recover to some degree, the amounts paid out for ltc for the institutionalized (ltc) spouse.
    The purpose of the rules is to protect the stay at home spouse from impoverishment during and after the death of the ltc spouse while still assuring the government’s right to recover costs.
    A surviving spouse oftentimes is left with only the larger of the two social security checks to live on and this is when the reverse mortgage becomes the most important. If the equity in the home is depleted early on due to paying for the care process of the ltc spouse, what is the surviving spouse supposed to do about the futue? That’s right, they will be forced out of their home because they won’t be able to afford to live there. This is precisely why Medicaid works the way it does.
    Please be careful what you wish for.

    • Jim,

      You forget that many of the surviving spouses end up on Medicaid as well. You cannot look at things in a vacuum as if what is true today remains so. Things change and surviving spouses may have more problems at the death of the first to die than at any point in that spouse’s life; rarely is the situation better when the first to die passes away than before Medicaid started for the decedent.

      The suggestions being made were more like the suggestions of sophomores. They had little understanding for the implications they recommended and few of those implications were improvements for Medicaid dependent seniors or their spouses.

      Like you, I see little to no interest in HECMs due to the suggested changes unless HECMs were mandated which is highly unlikely. Even if reverse mortgages were mandated, no doubt the reverse mortgages would be a specialized Medicaid reverse mortgages which would be offered directly by the federal government circumventing reverse mortgage lenders.

  3. Shannon, I would like to add that the Medicaid Estate Recovery provision allows for priority lien status over the claims of the heirs…This means that Medicaid gets reimbursed BEFORE the estate is distributed to heirs so don’t worry that the heirs are “gaming the system”.
    The HECM is a superior lien to the claims of Medicaid.

    • Jim,

      Thank you. I should have clarified my statement. Those typically gaming the system can be the senior themselves or a family member. I’ve seen it more often on the side of seniors approached by Medicaid ‘planners”.

  4. This $130B cost for LTC certainly dwarfs our $5B deficit.

  5. Shannon, thanks for taking a stand on this. “Gaming the system” is the best way I could have imagined it being said.

  6. Shannon, There is the 5 year “look back” provision for eligibility determination as well as for the detection of transfers of wealth to qualify for Medicaid benefits as well as to avoid repayment of the debt.
    I wonder how the new “financial assessment” rules will work with this new proposal? Talk about burning though the funds and then not having any way to afford the home.!

  7. Shannon, I would like to hear from you and others who think this proposal has merit, as to how you all see it playing out. For example, do you see a sudden surge of interest in hecms due to the proposed requirement of tapping home equity BEFORE Medicaid steps in? If so, how do you see it working under the new HECM product and financial assessment rules? Also, what impact do you foresee for the surviving spouse in the future?

  8. Mr Spicka, you’re obviously an attorney or planner that recommends the putting in place of plans to qualify for Medicaid at an earlier time. What about better educating the respective state Medicaid case managers of the uses of reverse mortgages as it “aids” the homeowner’s cash flow or to keep them out of a Medicaid facility? On more than one occasion a case manager has talked a client/homeowner out of using a RM because they said it could disqualify that homeowner from Medicaid, never telling them that IF properly initiated (like with LOC) the RM could be the difference in being able to stay in the home or the Medicaid room recently opened up from the waiting list.

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