Thursday April 13, 2000
The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) mandated all state Medicaid programs to recover the cost of nursing home care from the estates of deceased recipients. Congress and President Clinton wanted to make Medicaid nursing home benefits a loan, not a grant, for people with substantial exempt assets. They thought people would be more likely to insure privately against the risk of long-termcare, and avoid Medicaid dependency, if their estates were at risk.
Toward this end, according to legislative history, Congressional intent in authorizing estate recoveries was "to assure that all of the resources available to an institutionalized individual, including equity in a home, which are not needed for the support of a spouse or dependent children will be used to defray the cost of supporting the individual in the institution." (United States Code, Congressional and Administrative News, 97th Congress--Second Session--1982, Legislative History [Public Laws 97-146 to 97-248] Volume 2, St. Paul, Minnesota, West Publishing Company, p. 814.)
Technically, since the enactment of OBRA '93, operating a Medicaid estate recovery program has been a condition of receiving federal Medicaid matching funds. Nevertheless, the State of Michigan earned a reputation for thumbing its nose at the federal government by refusing to recover Medicaid benefits from recipients' estates.Failure to recover from estates gives Medicaid recipients with large exempt assets a free ride on Medicaid and therefore reduces the demand for private LTC insurance and privately financed home and community-based services.
Evidently, Michigan's policy has not changed recently. A September 1999 preliminary report and recommendations of "Michigan's Long Term Care Workgroup" fails even to mention Medicaid estate recovery. (For copies of this report, download at http://www.mdch.state.mi.us/msa/mdch_msa/ltcpdf/index.htm or call Trudie Frick at 517-241-2112). To their credit, however, Michiganders are starting finally to get with the program of controlling access to Medicaid nursing home benefits. The workgroup's report includes the following findings and recommendations:
"Divestiture of Assets. Many people think of Medicaid financial support as an entitlement. They take every possible opportunity to transfer their assets to protected status or their heirs in order to qualify for Medicaid support without spending their assets on their care. Medicaid was established to provide support for those with no assets and no other options. In order to preserve the availability of Medicaid for the truly needy it is necessary to assure that those who can afford to pay for their own care are not able to creatively divest their assets in order to qualify for public support."
(Long Term Care Workgroup, 1999, p. 20)
By controlling the hemorrhage of Medicaid funds lost to asset transfers, Michigan is trying to discourage excessive Medicaid dependency and encourage private LTC financing. Unfortunately, without recovering from recipients' estates, the state leaves huge exempt assets such as homes, businesses, automobiles, personal property, etc. untouched. It therefore makes Medicaid highly advantageous for people with wealth to protect and access to attorneys who can dodge the eligibility rules.
The Center for Long-Term Care Financing has a "kinder and gentler" approach to this problem. Let seniors who need help with LTC expenses keep their income and assets. Supplement their income so they can purchase quality care in the private marketplace at the most appropriate level of care. Secure this "line of credit" with the recipient's estate exactly as a real estate mortgage holder would do. Then, recover on the loan only after the recipient's last exempt dependent relative has died. Fully collateralized, privately administered, but federally backed, this system would empower propertied seniors to get the care they need without burdening the Medicaid system. It would also encourage potential heirs to contribute toward LTC costs--including insurance premiums--for their parents in order to protect their own estates. Relieving the burden on Medicaid and the taxpayers in this way would leave more public resources available for the genuinely needy. Everyone wins.
Read about this approach in the Center's "LTC Choice" report. Order a copy [$24.95; free to media and law makers] by contacting Sarah Allen by e-mail at email@example.com or by calling toll free 877-557-3627.
In the meantime, cheers to Michigan for taking some steps in the right direction. Now, go the rest of the way and implement a fully federally compliant Medicaid estate recovery program. Or, better yet, seek a HCFA waiver to implement LTC Choice.