​Stephen Moses came to Washington, D.C., two months ago to advocate for what he believes is a sure-fire plan to save the flailing Medicaid program $30 billion a year by, among other things, moving those eligible for both Medicaid and Medicare (dual eligibles) out of the Medicaid program.

Lawmakers listened to his pitch, but ultimately Moses says nobody bought his plan. He is now back in the other Washington, the one on the West Coast where he lives, but he suspects he will come back to renew his efforts in Congress when lawmakers see even greater threats to the Medicaid and Medicare programs in 2012 and 2013.

“Politicians are worried about it, but they are not scared enough to do anything,” says Moses, the president of the Center for Long-Term Care Reform, based in Seattle.

If the massive savings he envisions came to bear, Americans would get the message that they need to buy long term care (LTC) insurance and/or tap equity in their homes to finance care instead of overloading the Medicaid program, he says\.

Long term care providers would see a boost, relying on newly private-pay clients instead of suffering the massive shortfalls they currently experience from insufficient Medicaid reimbursement, Moses says.

The key points of the Moses plan include that the heaviest users of Medicaid’s most expensive benefit, long term care, are dual eligibles and the aged, blind, and disabled (ABD), which consume a disproportionate share of Medicaid’s total resources.

“Therefore, every actual or potential dual eligible, ABD, or LTC recipient diverted from Medicaid dependency will result in a disproportionate savings to the Medicaid program,” Moses says.

His conclusion is that preventing even a small slice of these heavy LTC users will result in huge savings and an improved Medicaid program.

To get such a radical shift accomplished, Moses says it is important to look at the reality of who is using the Medicaid program and how this differs from the original intent of Medicaid to serve the poorest of the poor.

In fact, he says, people on Medicaid are not necessarily poor. They are only poor if they need acute or preventive medical care, not if they are aged, blind, or disabled and eligible because they need long term care.

“Income is rarely an obstacle to Medicaid eligibility for people who require LTC. If they have too little income to pay all their medical expenses, including nursing home care, they’re eligible,” according to talking points Moses uses for his plan’s presentation.

“In other words, you don’t need to have low income to qualify for Medicaid long term care benefits. All you need is a cash flow problem after you pay all your medical and LTC benefits,” he says.

Moses notes that Medicaid limits non-exempt assets for LTC recipients to $2,000, but exempt assets are practically unlimited. An example he uses is that a home and all contiguous property up to $500,000, plus a business including the capital and cash flow, one automobile, prepaid burial plans, term life insurance, personal belongings, and other resources are all excluded without limit from eligibility asset caps.

In addition to what Moses terms very generous income and asset limits, Medicaid planners use simple and sophisticated methods to protect additional hundreds of thousands of dollars for affluent clients and their heirs. These techniques include gifting strategies, annuities, trusts, and life care contracts.

The bottom line is that Medicaid is not really a long term care safety net for people who have spent down into impoverishment, rather the program intended for the poor is the principal payer of LTC for nearly everyone, Moses says.

“Medicaid pays less than one-third of the dollars for nursing home care [32.8 percent], but covers nearly two-thirds of nursing home residents [64 percent] and touches over 80 percent of all nursing home patient days with its extremely low, quality-destroying reimbursement rates,” his presentation said.

Moses wants to reform the way things are done by replacing the home-equity exemption with a requirement that people consume their home equity with a reverse mortgage before they become eligible for Medicaid LTC benefits.

This could save $30 billion per year, he says. How? Moses points out that Medicaid spent $142.9 billion on 8.9 million dual eligibles in 2009, or $16,056 per dually eligible recipient.
“To save $30 billion per year, Medicaid would only need to reduce the number of dual eligibles by 1,868,460, or 21 percent,” Moses says.

He says data show this is feasible because half of households headed by people over 62 could get more than $70,000 each from a reverse mortgage. That money, combined with other income and assets, could be used for LTC, especially private home- and community-based services, and delay or prevent Medicaid eligibility for millions of Americans.