Wednesday March 7, 2001
Seattle—
On January 11, 2001, the Health Care Financing Administration of the U.S.
Department of Health and Human Services published Transmittal 75 of the
"State Medicaid Manual—Part 3—Eligibility" containing new and revised
material effective February 15, 2001 bearing on mandatory and optional Medicaid
estate recoveries. Among numerous other
subjects, this new manual issuance provides guidance on how and under what circumstances
state Medicaid programs may collect against annuities, "dual
eligibles," individuals with long-term care insurance policies, managed
care payments, and American Indians. To
read the publication in its entirety, go to HCFA's website at http://www.hcfa.gov/pubforms/transmit/r75sm3.pdf.
We've decided not to provide excerpts here, because the material is nearly
indecipherable in context, and would be incomprehensible if excerpted without
prolonged explanation. Nevertheless,
we will provide an account, which follows, of why we believe Medicaid estate
recoveries are important. We regret
that the Center for Long-Term Care Financing does not have the staff resources
to answer technical questions about the HCFA Transmittal or the nuances of
estate recovery, so please direct your calls and emails to the Health Care
Financing Administration and not to us.
Why Estate Recoveries Matter
To prevent Medicaid dependency is an excellent reason why people should plan
early and save, invest or insure fully for long-term care. We often point out the benefits of paying
privately for long-term care to avoid the access and quality problems
associated with Medicaid financing. Access to quality care is not the only
reason to stay off Medicaid, however.
The Medicaid program requires a recipient's estate to reimburse the
state and federal governments for the cost of his or her care.
Is Medicaid estate recovery just a pernicious means for uncaring bureaucrats to
add insult to injury? No, indeed. The purpose of estate recovery, according to
legislative history on the intent of Congress 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)
In other words, Congress did not want to devastate families financially who are
facing an unplanned for long-term care crisis.
That's why the legislators allowed generous eligibility exemptions that
permit families to retain large amounts of income and assets while a loved one
receives Medicaid-financed care. On the
other hand, Congress did not want Medicaid to become an "entitlement"
on which people would rely to indemnify their heirs against the loss of an
inheritance to long-term care expenses.
The policy makers' "kinder and gentler" approach was to allow
generous eligibility criteria, but to recover benefits paid after recipients'
died, from their thus-sheltered estates.
Some states, such as Oregon, have pursued estate recoveries aggressively since
before the federal Medicaid program began. The Tax Equity and Fiscal
Responsibility Act of 1982 explicitly authorized Medicaid estate recoveries as
a state option. Since the Omnibus
Budget Reconciliation Act of 1993,
recovery of benefits correctly paid out of the estates of deceased recipients
has been mandatory for every state Medicaid program as a condition of receiving
Federal matching funds.
Most state implementation and federal enforcement of Medicaid estate recoveries
has been spotty and inefficient at best, however. The program is politically sensitive and challenging to
administer. Furthermore, it is being
undermined all across the country. Medicaid
estate planning attorneys, who push Medicaid's already generous eligibility
criteria to their outer limits, also routinely (and legally) evade the
"mandatory" estate recovery liability for their well-heeled clients.
So-called "senior advocates" often fight against efficient and
effective enforcement of estate recovery in the mistaken belief that it is a
punitive measure instead of a means to replenish Medicaid financially and
empower the program to provide better care for everyone.
Currently in California, for example, Medicaid planners and senior advocates
have joined forces to fight against "spousal recoveries." Federal law prohibits states from pursuing
recoveries from the estate of a deceased Medicaid recipient until after the
death of the recipient's surviving spouse.
If the California Advocates for Nursing Home Reform (CANHR) succeeds in
stopping California from pursuing spousal recoveries as it is currently
attempting to do, the state will lose an enormous potential funding source for
indigent long-term care and estate recovery will become moot for anyone with a
surviving spouse. (Asset transfers
between spouses are no longer restricted so institutionalized spouses will
routinely transfer their assets to community spouses in order to avoid recovery
even more than they already do.)
In a 1989 report, titled "Medicaid: Recoveries From Nursing Home
Resident's Estates Could Offset Program Costs," the General Accounting
Office wrote "Because about one-third of Medicaid nursing home residents
who own a home have a spouse living in the community, a significant portion of
potential recoveries is lost unless a state authorizes recoveries from the
estates of surviving spouses. For
example, GAO estimates that California will recover about $15.8 million from
the estates of Medicaid recipients admitted to nursing homes in 1985 under its
existing recovery program. But it could
recover an additional $11 million if the state enacts legislation to authorize
recoveries from the estates of the surviving spouse when he or she, in turn,
dies." Today, California recovers
almost three times as much from estates as it did in 1985 and would therefore
sacrifice potentially $30 million per year by prohibiting spousal recoveries if
GAO's estimates remain accurate.
The stakes are huge. As we have often pointed out, when people can ignore the
risk of long-term care, avoid the premiums for private insurance, and qualify
easily for Medicaid if and when long-term care becomes necessary, we should not
be too surprised that most Americans do not plan, save or insure for long-term
care and end up on Medicaid by default.
In our current long-term care system, efficient estate recoveries are
critical. They are the only financial
leverage the system has to encourage people to prepare to pay privately for
long-term care. The Center for
Long-Term Care Financing believes that a better approach would be to provide
uninsured seniors with formal lines of credit on their estates so they could
avoid welfare altogether and purchase quality care in the private
marketplace. Until this "LTC
Choice" plan of ours (read more about it at http://www.centerltc.org/pubs/CLTCF%20Report)
replaces them, however, estate recoveries remain the only viable safety net for
America's long-term care safety net, Medicaid.
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