A recent publication on long-term care (page down for citation) demonstrates a common misrepresentation of the analysis of the problems of long-term care I put forth in Aging America’s Achilles Heel: Medicaid Long-Term Care, which was published by the Cato Institute in 2005.

First, the misunderstanding:

"Some observers contend that the existence of Medicaid as a safety net for long-term care and the possibility of transfer of assets to qualify for Medicaid lead middle class people to forego private insurance (Moses, 2005). However, based on the widespread misunderstanding of Medicare coverage, the denial of the risk of needing long-term care, and the lack of knowledge about Medicaid eligibility rules, it seems unlikely that this is a major factor in the lack of insurance purchase by people in their 50s and early 60s. Moreover, despite the conventional wisdom that transfer of assets is widespread, there is a large, rigorous research literature that finds that transfer of assets is relatively infrequent and usually involves quite small amounts of funds when it occurs. The best estimate is that the maximum amount of asset transfer is about 1 percent of Medicaid nursing home expenditures."

Now this is a typical misrepresentation of my analysis. The predominance of Medicaid financing of LTC has stopped people from thinking about LTC risk and cost. That's why Medicaid crowds out LTC insurance, not that consumers consciously think about the issue, which they don't until in crisis.

Regarding transfer of assets, its prevalence is not critical to my analysis. It's only the straw that breaks the camel's back. The big problem is that most people qualify for Medicaid LTC without asset transfers or other kinds of Medicaid planning.

* The NIC Compendium Project: A Guide to Long-Term Care Projection and Simulation Models, December 2007, Final Report Prepared for Robert G. Kramer and Anthony J. Mullen, National Investment Center for the Seniors Housing & Care Industry. Prepared by Joshua M. Wiener, Ph.D. Marc P. Freiman, Ph.D. David Brown, M.A. RTI International, Health, Social, and Economics Research. Proprietary, for sale, no URL.