I mean, I think the old guy already knew himself that whatever Yang Kai gave him was more than just 'a pill'. He's very quick to try to take the attention from him, because he knows that if people were to find out that he possessed such a miraculous ailment... he'd become the target of pretty much everyone but those that care for him. Granted, the excuse he made up is almost obvious bullshit to us. But we can't forget that the author's of these long cultivation novels tend to write in endless streams, and gloss over aspects, or forget previous characters/places/names/appearances... often replacing them with the next best thing, or some 'convenient explanation'.
But you are correct, he could've told the sect master all that, and I'm sure the sect master could formulate it in such a way that wouldn't arouse greed from the other elders. I think these things are easier to spot when you're the reader, not the writer.