How Medicaid’s Estate Recovery Can Help You Make New Friends:
Monday, 29 March 2010 10:00
Why Reverse Mortgage Brokers should be going out of their way to meet people who sell Long-Term Care Insurance
Has there ever been a symbiotic relationship quite like the one that exists between Long-Term Care Insurance (LTCI) and Reverse Mortgages?
Most likely there are those who question my use of the word symbiotic in connection with insurance and mortgage products. However, one definition of symbiosis is: a cooperative, mutually beneficial relationship between two people or groups. From that perspective when talking about those people and groups made up of business people it really isn’t much of a stretch to extend the term to products. Either that or I am spending too much time watching the Syfy channel.
Following this line of thinking the cooperation we are looking for is one that should exist between two different groups of sales people, those in the Reverse Mortgage business and those that sale long-term care insurance (LTCI).
As the ability to identify sources of income needed to fund the premiums required for LTCI is essential to the success of people who sell LTCI. It follows suit that it would be advantageous for reverse mortgage specialists to make sure that people who are looking for ways to pay for LTCI know that the RM option often fits that bill nicely. And being since the primary market for both products is the same cooperation between these two groups of sales people should be obvious to anyone.
Unfortunately, we live in a world where it is possible for an idea that makes perfect sense to often carry little weight in the eyes of regulators and nay-sayers. Regrettably, a seemingly endless number of “advisors” i.e. many of the people who create regulations for products designed for the senior market, often know little about the products on which they are passing judgment and regulating. None-the-less there is no excuse for professionals in both industries to not explore ideas and options that may be beneficial to their clients.
Hard lessons learned from years of experience have taught me that regardless of how good an idea appears to be on its surface, it always pays to do a little digging to uncover the underlying facts or more importantly make sure that there are supporting facts. Better known as due-diligence, the key in this process is to make sure you are looking for information rather than affirmation. Although time consuming, this process almost always provides additional rewards in the form of information about other products and regulations that are not directly related providing understanding and insight that can support your position, disprove negative stereotypes and generally enhance marketing and sales approaches.
One search provided information that completely dispels one of the most popular negative positions taken by bureaucrats and so called advisors when it comes to using a reverse mortgage to pay for LTCI. And although these so called experts feel perfectly confident when they state emphatically that people who qualify for a reverse mortgage should not use those funds to buy any type of insurance. When it comes to LTCI they are so far off base that they’d need a ticket just to get back into the ballpark. You see in order to honestly make such a statement you would have to be totally ignorant about Medicaid’s Estate Recovery provisions.
When it comes to using funds from a reverse mortgage to pay for long-term care insurance we should start by acknowledging a simple truth; both the federal government and the states have been forcing people to use their home to pay for long-term care services for some 45 years.
Anyone who knows anything about Medicaid and/or long-term care is well aware of the fact that Medicaid is far and away the largest payer of long-term care services. This is nothing new and was something that the writers of the program obviously anticipated in 1965 when the program began. We know this because law that was written to put Medicaid into existence included provisions that allowed states to impose liens on property in the estates of deceased Medicaid recipients.
In 1993 the federal government used OBRA to amend the earlier Medicaid Estate Recovery provisions, as such, states they were now required to pursue recovering the cost for Medicaid from the estates of people who had received long-term care services or had prescription drug expenses paid for by Medicaid.
The bottom line is that a primary residence owned by a Medicaid precipitant is a recoverable asset. For those who may not be familiar with this recovery process it’s important to understand that the law does provide for a none institutionalized spouse to live in the home uncontested for as long as they live, even so the end result is the same, Medicaid can and will force the sale of the home to recover long-term care expenses.
So the question is: If the government, by way of Medicaid Estate Recovery, already has a system in place that allows for liens to be placed on the houses of people who have received long-term care services that were paid for by Medicaid; why is it a bad idea for someone to use equity in their home to buy LTCI which would pay for those same services?
The answer to which is: It’s not a bad idea! Conversely it’s an excellent idea that can be enormously beneficial to individual homeowners while at the same time being of great benefit to all taxpayers. As a matter of fact if implemented nationwide it could actually reduce the federal budget. Of course to think like that you have to buy into the ideas that taking personal responsibility for ones action is a virtue and reducing both federal and state government expenditures is a fiscally sound idea.
Here is the bottom line; even though both products for the most part are targeted at the same market place cooperation between the different sales forces when it comes to sharing information and ideas is at best limited. One reason for this may be that the information these two sides try to share is often seen as having little to no value to the other group. Reality dictates that in all likelihood you are not going to find many LTCI salespeople who want to sit and listen to you tell them everything you know about reverse mortgages, inversely you probably aren’t all that interested in listening to an LTCI person lecture you on long-term care. However, taking a little time to discuss how Medicaid Estate Recovery provisions are playing a negative role in both of your business’ and you will almost certainly find that the government has provided you with some very solid ground on which a mutually beneficial business relation can be built. What makes it even better is that your efforts will result in any number of seniors benefiting greatly from your combined knowledge and professionalism.
You can find all the information you will ever need about Medicaid Estate Recovery by typing those three words into any search engine.
Over the next couple of months I am going to be writing articles that deal with the positive and negative aspects we have to deal with when it comes to considering reverse mortgages, annuities and insurance in the same estate plan. Should you have any questions or suggestions on this topic or for that matter any financial planning/reverse mortgage related topics I would be happy to receive your thoughts via email at
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