[LTPC-disc] Fw: LTC Bullet: Scully Has it Right, Almost

[Doug Burg]

----- Original Message ----- 
From: "Center for Long-Term Care Financing" <ltcbullets@centerltc.org>
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Sent: Tuesday, June 03, 2003 2:12 PM
Subject: LTC Bullet: Scully Has it Right, Almost


> LTC Bullet:  Scully Has it Right, Almost
>
> Tuesday, June 3, 2003
>
> Sheboygan, Wisconsin--
>
> LTC Comment:  CMS Administrator Tom Scully's stream-of-consciousness
> speaking style is like reading James Joyce:  hard to follow but you figure
> there must be a goldmine in there somewhere.  In Scully's case, there is,
> and we'll dig out a few nuggets for you from a recent speech, after the
> ***news***.
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> the following sentence in her article was in error:  "The 2000 regulation
> did an about-face, permitting 'nursing home only' policies but not 'home
> health-care only' policies."  The correct sentence should have said:  "The
> 2000 regulations did an about-face, permitting 'nursing home only'
policies
> as well as 'home health-care only' policies."  Thanks to Marilee for
> correcting the mistake and to "one of your astute readers" for catching
it.
> ***
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>
> LTC BULLET:  SCULLY HAS IT RIGHT, ALMOST
>
> LTC Comment:  Following below is an excerpt from a speech by CMS
> Administrator Thomas Scully to the Georgetown University Long-Term Care
> Financing Project's May 21, 2003 conference titled "The 21st Century
> Challenge:  Providing and Paying for Long-Term Care."  You can access
> videos and transcripts of each of this meeting's presentations at
>
http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=869
> .  But don't bother.  The whole day, except the last hour, was a boring
> rehash of long-term care financing oldthink.  Then Scully came to the
> podium.  He's a daring, insightful, shoot-from-the-hip, uniquely
> entertaining speaker, but . . . oh well, you'll see what we
> mean.  Definitely try to read the transcript of his remarks below, but
just
> in case you get lost or impatient, here's what we take from it.
>
> 1.  Long-term care is expensive, will become more so, and is placing
> tremendous fiscal strain on Medicaid and Medicare.
>
> 2.  Middle and upper class people routinely qualify for Medicaid nursing
> home benefits without spending down, often with the help of attorneys,
and,
> whether you condone this practice or not, no one thinks it is the best way
> to provide long-term care for the elderly.
>
> 3.  Most seniors own their homes and most of these own their homes free
and
> clear.  Aging Americans have a huge financial resource locked up in their
> home equity that could be liquefied by means of reverse mortgages to
> produce supplemental income to help them live richer lives.
>
> 4.  Supplemental income from reverse mortgages could be used to purchase
> quality long-term care services in the private marketplace, thus
preventing
> or delaying dependency on Medicaid nursing home care.
>
> 5.  Alternatively, income from reverse mortgages could be used to purchase
> private long-term care insurance in cases where the individual is
insurable
> medically, but the premium might otherwise be unaffordable.
>
> So far, Administrator Scully's plan is right on the mark.  But, here's
> where he falls short.  He states that the reverse mortgage should be
> entirely voluntary and that it will not become a pre-condition for
Medicaid
> eligibility.  Of course, that proviso defeats the whole idea.  Reverse
> mortgages have not become popular in the past for the simple reason that
> Medicaid exempts the home and all contiguous property regardless of
> value.  If the home value is not at risk, why tap into it to pay privately
> for long-term care or LTC insurance?  Of course, we among the LTC savvy
> know it still makes sense, because private-payers command better care in a
> wider range of care settings.  But most people don't see that nuance, at
> least not in time.  Their choice--usually made by adult heirs after a
> parent is mentally incapacitated--is between free or subsidized Medicaid
> nursing home care and full private-pay spend-down for anything else.
>
> Scully and CMS are on the right track with their push to encourage home
> equity conversion.  But unless and until it becomes a condition of
> eligibility, most people will ignore the opportunity until it's too late
> and take advantage of Medicaid's generous and elastic eligibility
> rules.  Because Medicaid's ostensible estate recovery requirement is as
> easy to evade as eligibility is to obtain in the first place, the program
> remains inheritance insurance for boomer heirs instead of the LTC safety
> for the poor that it is supposed to be.  For a "kinder and gentler"
> solution to the spend-down dilemma, see "LTC Choice:  A Simple, Cost-Free
> Solution to the Long-Term Care Financing Puzzle" at
> http://www.centerltc.com/pubs/CLTCFReport.pdf .  In the meantime, here is
> Scully in his own inimitable words.
>
> ---------------------
>
> "Perspectives from the Centers for Medicare and Medicaid Services"
> Remarks by
> Administrator Tom Scully of the Centers for Medicare and Medicaid Services
> Source:  The Henry Kaiser Foundation website at
>
http://www.kaisernetwork.org/health_cast/hcast_index.cfm?display=detail&hc=869
> .
> Note that every page of the transcript has the following caveat in a
> footnote:  "kaisernetwork.org makes every effort to ensure the accuracy of
> written transcripts, but due to the nature of transcribing recorded
> material and the deadlines involved, they may contain errors or incomplete
> content.  We apologize for any inaccuracies."
>
> Mr. Tom Scully:  ". . . we have an enormous population of nursing homes,
> middle class and upper class people in nursing homes and obviously as you
> all know there's a huge debate about what to do about that in a spend down
> and so we have half the lawyers in the United States that I know of that
> are involved in the long-term care spend down business which is fine and
> that's happening in many states and you can say whether it's good or bad
> but I really believe that most people don't want to be in nursing homes
now
> if that's the only option that they have to fund their long-term care
> they're going to transfer their assets and go in a nursing home but I
don't
> think that's what most people want and I think we (unintelligible) the
fact
> that we get 70% of the nursing home (unintelligible) now paid for by
> Medicaid that's a pretty shocking trend and the Medicaid program is now
> going to be about $320 billion dollars next year and the fastest growing
> part of long-term care, it's the biggest intangible for the states that
> they can't predict or control is nursing home care and some of those
people
> are low income and they really, really need it and some of those people
> probably shouldn't be in that category but if you're trying to take care
of
> the disabled and you're trying to take care of our women and kids and then
> you look at where the Medicaid population explosion is and it's really in
> long-term care.
>
> "I think realistically we're going to change that and then the states will
> say that you can't spend down anymore? No. I know but I do think there are
> a lot of other ways to take the pressure off which gets to my primary idea
> which I'm pushing which is that I believe that a lot of people have access
> in their home that can be tapped and I think that when you look into
> reverse mortgages and what assets people have, we have 70% of the people
in
> the United States that are seniors that have a paid off mortgage, the
> average national is about $70,000 and many people have assets of over
> $100,000 dollars and that's not going to solve all of their problems but
> what frequently happens is they transfer that to their kids and they spend
> down on the Medicaid. If they had a clear, easy, understandable,
> non-threatening way where they could get a reverse mortgage so maybe some
> of you know that (unintelligible) exist that they have that cash and
equity
> in their house so that they don't have to pay another penny so they don't
> have to be scared of losing their house and draw on that to pay for home
> healthcare as some kind of long-term care insurance package a lot of
people
> would choose that. I don't think we should force them to do it but I can
> tell you that I'm going through that right now with my mother and I
> certainly can tell you that if you're looking to get into long-term care
> and you want to stay at home that's a very good option. I don't think it
> should be mandatory but we have an awful lot of people who take the assets
> in their house and they transfer it to their kids then they go on the
> Medicaid and I don't that's a good - I think we should at least give them
> the option and give them the (unintelligible) choice of that and most of
> the time for seniors it's an incredibly confusing thing, they don't trust
> banks, they don't trust anybody, you tell them to sign a note on my house
> and I guarantee you don't have to pay another penny and we'll finance your
> long-term care and don't worry about it, most seniors will think - they're
> just not going to trust you which is why it's never happened and the
> (unintelligible) program is not exactly structured like that.
>
> "I believe that if we structured a program where we actually made it like
> student loans, we could walk into (unintelligible) bank or some other bank
> and have a clear Medicare sponsored structured four or five packages that
> you want to put up 60% of the equity in your house and you want to put in
> long-term care package now. There would be an awful lot of people who
would
> choose that because they'd much rather stay at home, they'd much rather
get
> some type of home health insurance policy to stay at home and get coverage
> and you'd take a lot of pressure off the Medicaid system but most people
> don't understand that. Most seniors are scared of banks, they're scared of
> these problems and I believe that if you take the HUD program for reverse
> mortgages and tie it to together with the trust that people have in
> Medicare and say look here's some clear choices, you're not going to lose
> your house, you're not going to have to pay any more money but you can
take
> this to stay at home or go to assisted living and get some other options
> and you'll take an enormous amount of pressure for the next 25 years off
> the Medicaid program and start putting the resources where the resources
> should be, the disabled, low income kids and families and people that
> really truly need it and even (unintelligible) these (unintelligible)
> policies and still need to go after four or five years into a Medicaid
> nursing home but if you're looking at really where the pressure's coming
> from the pressure's coming from middle income people in nursing homes and
> it's not making it easy for the states and it's (unintelligible) creating
> (unintelligible) problems in the disabled community and more problems for
> S-CHIP and basically you know basic Medicaid kids and families and I think
> if you're looking for places to find new sources of financing, give people
> choices I wouldn't advocate to start changing the spend down rates but if
> you're trying to get people to find new resources and find new places to
> finance this coverage I don't believe and I'll just say how many of the
> people in this audience have long-term care insurance? That's probably
> about three times - probably ten times the national rate, there's probably
> about 15% of the people in this room but no matter what you do I just
think
> people change employers too much, structurally we're not set up for people
> to have portable long-term care insurance, a lot of people are not going
to
> buy it at this point and hopefully we can change that over the years but I
> think it's going to be a long time before we get these 20 and 25 year olds
> buying long-term care insurance the way they buy health insurance or life
> insurance. So maybe we're going to start thinking about how do they get
> long-term care insurance when they're 65 or 70. My mother bought long-term
> care insurance when you're 71 that's counter intuitive you shouldn't be
> buying your long-term care insurance when you're 71 but I think if you're
> looking for a way to finance this (unintelligible) in a large way when
> people pay off their mortgages their entire life and they get to be 70
> what's their primary asset? They're primary asset is the equity in their
> house and you know my mom paid $17,000 bucks for her house in 1954, she's
> lived there ever since and she doesn't think of it as an asset - I don't
> know what it's worth now but it's probably worth about $200,000 dollars
and
> she never thinks of that in assets to pay off her - to pay for long-term
> care and it should be you know she was and there's no senior in the world
> that would want to sign a second mortgage to pay more money but if you
said
> you could put up your house, you'll never lose it, you're greedy kid, me,
> is not going to get the assets that you can draw down to pay for your
> long-term care costs then that's a very viable option for a lot of people
> and I think it would work and hopefully we can get a program between HUD
> and HHS to come up with some easy structured, easily understandable
options
> to do this and now in fairness I shouldn't take credit for this idea
> because it's not my idea it's actually NCOA's idea and somebody in here,
> I'm sure there's some of them and the AARP but I think it's a good idea
and
> I've been pushing Secretary Thompson to do it and I think he's working -
> we're working with HUD to try and pull - to push this idea and I think in
> the long run of all the options that we're looking at and things that we
> can do and we can argue about Medicaid whether we should have higher
> (unintelligible) or lower (unintelligible) or different rules forever
> taking the pressure off from the places where Medicaid was never relied on
> to work I think is a critical ingredient in the future, moving forward and
> then providing long-term care to the people that truly need it and so the
> enormous population that we see coming our way.
>
> "Anyway that's the quick - I had a long speech and I didn't look at it so
> that's a good thing. Very lucky for all of you guys but again this is not
a
> front burner project for CMS, it's not in my day to day job description
but
> I just think structurally the pressures we're going to have in this area
> are huge and the pressures on Medicaid are huge and I think if we look at
> it right now and if you look where the governors are cutting services,
> they're cutting people off the Medicaid rolls, families and kids because
> long-term care population is not something that they're really able to
> restrict or cut and it's one big finite thought and the governors are up
> for some tough choices as are we and I just think if you're going to put
> the money where I think most people think it should be going, disabled,
> kids and families and truly low income seniors you need to find ways to
> take pressure off that because you can't have 13%, 14% inflation forever.
> Well did I wear you out? Was that enough? Hey all right. It's never a good
> thing when you're (unintelligible) start generating (unintelligible)
> [laughter]."
>
> A formatted version of today's LTC Bullet is available at
> http://www.centerltc.org/bullets/current/443.htm .
>
>
>
>
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