LTC Bullet: Medicaid, LTCI and RAMs: The CMS Perspective

Wednesday, November 26, 2003

Seattle--

LTC Comment: What is Medicaid's role in long-term care? Does it crowd out private long-term care insurance? Does it discourage reverse mortgages by exempting homes? Read the surprising answers from the "head fed" for Medicaid. After the ***news.***

*** It's about time to pull out the check book and make those end-of-year charitable contributions. Don't forget the Center for Long-Term Care Financing. The Center is a bona fide 501(c)(3) charitable, non-profit organization. Your tax-deductible contributions of $150 or more lock in another year of the "Donor Zone," including our one-a-day email publications. Plus, you'll help us continue the fight for rational long-term care policy. Please remember, the LTC Bullets, E-Alerts, Readers and Data Updates are only a small part of what the Center does on your behalf. We're constantly speaking, testifying, publishing, and consulting across the country with logically reasoned, empirically documented advocacy for private long-term care financing options. Help us save Medicaid for the needy by diverting as many people as possible to private insurance and home equity conversion. Please send your donations to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, Washington 98109 or contribute online at http://www.centerltc.com/support/index.htm . ***

*** Check out the "Nursing Home Statistical Yearbook" at http://www.longtermcareinfo.com/crg/nursing_home_yearbook.html . You'll find links to an introductory article, the table of contents and how to order the $95 publication. For more details, read The LTC Data Update #3-030 in The Zone. Forgot your user name and password? Just contact mailto:damon@centerltc.org and he'll look them up for you post haste. ***

*** The Certified Senior Advisor organization makes a contribution to the Center for Long-Term Care Financing for every new enrollee to their program who mentions the Center and cites the "source code" number 8196. Although the Center does not endorse any companies or professional designations, we've heard a lot of good things about CSA and we've met many capable professionals who have attended their training and received that designation. For information on the CSA course and certification, go to http://www.society-csa.com/ . If you enroll in the CSA program, please mention the Center for Long-Term Care Financing in your application and reference source code 8196. Drop us an email to mailto:info@centerltc.org and let us know you've enrolled. Then send us your evaluation of the program when you've completed it. CSA classes are coming up December 3-6 in Orlando, FL; January 14-17 in Charlotte, NC; January 28-31 in Phoenix, AZ; February 4-7 in Walnut Creek, CA. ***

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*** LATEST DONOR-ONLY ZONE CONTENT: Here's the latest Zone content followed by instructions on how to subscribe so you can receive these critical epistles daily by email.

The LTC Reader #3-047--Giving Nursing Homes a Chance to Explain (Published nursing home quality data is often misleadingly negative. Here's a website that provide "the rest of the story."

LTC E-Alert #3-061--RAND Study Shows Medicare and Medicaid Failing Seniors (The aged get recommended medical care only half the time. Why and what's the fix?)

The LTC Data Update #3-030: Great Data Source on Nursing Home Utilization (Who gets what care in nursing facilities with which deficiencies and who pays, etc., etc.?)

The LTC Reader #3-048--Seniors Rest Easy with LTCI (New report on sleep disorders of the aging suggests a thoughtful new close for LTCI producers.)

Don't miss our "virtual visits" to major LTC industry conferences in The Zone. You'll find our comparison of the conferences, session summaries, interviews and pictures at http://www.centerltc.com/members/index.htm .

Individual donors of $150 or more and corporate donors to the Center for Long-Term Care Financing receive our daily email LTC Bullets, LTC E-Alerts, LTC Readers, and LTC Data Updates for a full year. You'll also get access to the donor-only zone where these publications are archived along with other donor-only features. If you already qualify for The Zone, you can click the following link, enter your user name and password, and go directly to the latest donor zone content and archives: http://www.centerltc.com/members/index.htm . If you do not already qualify for The Zone, mail your tax-deductible contribution of $150 or more to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA 98109. Then email mailto:damon@centerltc.org your preferred user name and password (up to 10 characters each). You can also contribute online by credit card or direct withdrawal at http://www.centerltc.com/support/index.htm . ***

LTC BULLET: MEDICAID, LTCI AND RAMs: THE CMS PERSPECTIVE

LTC Comment: Dennis Smith is Director of the Center for Medicaid and State Operations of the Centers for Medicare and Medicaid Services, or CMS, which administers Medicare and Medicaid. Mr. Smith is the chief federal official responsible for Medicaid nationwide. He was scheduled to address the "Long-Term Care Producers' Summit Conference" in New Orleans on November 17. Unfortunately, Mr. Smith had to cancel late in the process, but his office provided answers to the following questions. Center President Steve Moses, who was to moderate the program (which has been postponed until next year), suggested the questions listed in CAPS below as a guide for Mr. Smith's presentation. Several highlights in his answers are worth noting:

* Medicaid is the biggest LTC payer in the country.

* Medicaid pays for home and community-based services (HCBS) as well as nursing home care.

* State fiscal crises are negatively affecting Medicaid LTC.

* States are cutting back on eligibility, services and reimbursement in ways that "adversely affect the quality and amount of LTC services people receive under Medicaid."

* CMS discourages "abusive" Medicaid estate planning practices.

* CMS encourages people to consider reverse mortgages and private long-term care insurance as alternatives to Medicaid for financing their long-term care.

* Medicaid long-term care competes with private long-term care insurance and makes the product more difficult to sell.

Readers of LTC Bullets will not find these facts surprising. What is remarkable is that the federal Medicaid program is acknowledging them.

Note the following answer CMS gives to our question whether Medicaid's efforts to provide home and community-based services compete with private insurance: "Since LTC insurance is marketed primarily as a way to pay for nursing home care for elderly individuals, de-institutionalization efforts for persons with disabilities may not have much effect on the marketability of LTC insurance." It is of course untrue that LTC insurance is primarily marketed for nursing home care. If fact, private insurance is usually promoted today as the best way to help people postpone or prevent nursing home institutionalization.

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Here are our questions in CAPS followed by the answers CMS provided:

WHAT IS THE ROLE OF MEDICAID IN LONG-TERM CARE?

* Medicaid is the largest single payer for LTC services in the country.

* Medicaid pays not only for nursing home care, but for LTC in community settings; e.g., home health services, Personal Care, Home and Community-Based Services waiver services.

HOW MANY PEOPLE ARE AFFECTED AT WHAT COST?

* Despite progress, most Medicaid funds for long-term support services are still spent on institutional care.

* In 2001, 71% spent on institutional care (nursing facilities (NF) and Intermediate Care Facilities for the Mentally Retarded (ICFs-MR)).

* In about 15 states more than 80% of Medicaid funds were spent for institutional services in 2001.

* From 1991 to 2002, MA [Medical Assistance, AKA Medicaid] long-term care spending more than doubled to $82.1 billion, which represented 34% of total Medicaid expenditures and a 8.5% increase from 2001.

* Nursing Homes - $46.5; ICFs-MR - $10.9; HCBS waivers - $16.4; MA Personal Care - $5.5; MA Home Health - $2.8 [amounts in billions]

* By 2020, institutional Medicaid LTC $$ will approach 70 Billion.

WHAT EFFECT ARE THE STATE FISCAL CRISES HAVING ON MEDICAID'S LONG-TERM CARE PROGRAM? HOW ARE COVERAGE, BENEFIT, AND REIMBURSEMENT CUTBACKS AFFECTING THE PROGRAM'S ABILITY TO PROVIDE QUALITY CARE?

* State fiscal problems have a negative impact on Medicaid LTC care.

* To make up for budget shortfalls, states are cutting services and/or tightening eligibility criteria so fewer people have access to Medicaid services, including LTC services.

* Examples:

o Some states have eliminated medically needy programs, which are a major point of entry for inpatient LTC services.

o Some states are placing limits on the availability of nursing home care.

o Some states are reducing spousal impoverishment resource and income allowances so that applicants will have to finance more of their own nursing home care.

* Obviously, reductions of this type adversely affect the quality and amount of LTC services people receive under Medicaid.

WHAT ARE YOUR BIGGEST CHALLENGES IN ADMINISTERING MEDICAID'S LONG-TERM CARE COMPONENT?

* Assisting states in maintaining the highest level and quality of LTC services possible, particularly during difficult economic times.

* Assisting states in reducing the abusive use of estate planning techniques to obtain Medicaid payment for nursing home care.

WHAT IS THE NEW FREEDOM AND PROJECT INDEPENDENCE?

* Executive Orders
-NFI [New Freedom Initiative], February 2001
-EO 13217 - Alternatives for Community Living

o Increasing access to assistive and universally designed technologies
o Expanding educational opportunities for Americans with disabilities
o Promoting homeownership
o Integrating Americans with disabilities into the workforce
o Expanding transportation options, and
o Promoting full access to community life.

* Independence Plus

o Based on successful Cash and Counseling & Self-Determination demonstrations
o Permission giving for some self directed practices already in place, creation of new services, establishing basic TA [technical assistance] and expectations, creation of waiver templates for allowing states to grant individuals and families personal control and choice
o Allow for establishment of individual accounts controlled by the individual with a disability
o Continues to evolve as learning occurs

WHAT EFFECT IS THE MOVE TO DE-INSTITUTIONALIZE MEDICAID NURSING HOME RECIPIENTS LIKELY TO HAVE ON (1) DEMAND FOR THE PROGRAM'S HOME AND COMMUNITY-BASED SERVICES, (2) THE PRACTICE OF MEDICAID ESTATE PLANNING (ARTIFICIAL SELF-IMPOVERISHMENT) TO QUALIFY FOR BENEFITS, AND (3) THE MARKETABILITY OF PRIVATE LTC INSURANCE?

* Obviously, efforts to de-institutionalize nursing home residents are likely to result in increased demand for HCBS waiver services.

* De-institutionalizing nursing home residents may not have a major effect on estate planning activities. Primary candidates for de-institutionalization are persons with disabilities, while those most likely to engage in estate planning activities are the elderly.

* Since LTC insurance is marketed primarily as a way to pay for nursing home care for elderly individuals, de-institutionalization efforts for persons with disabilities may not have much effect on the marketability of LTC insurance.

WHAT ROLE DO YOU SEE FOR PRIVATE LONG-TERM CARE INSURANCE IN FINANCING LONG-TERM CARE? COULD LTC INSURANCE HELP TO RELIEVE THE FISCAL BURDEN ON MEDICAID? HOW? WHAT PUBLIC POLICY CHANGES WOULD HELP?

* CMS supports the use of LTC insurance to pay for long-term care.

* Greater reliance on LTC insurance to finance LTC services clearly would reduce the fiscal burden on Medicaid since, if LTC insurance pays a greater share of the cost of LTC, Medicaid would have to pay less.

* It's difficult at this point to say definitively what public policy changes would help promote the use of LTC insurance. Making it more difficult to shelter assets to obtain Medicaid nursing home care would help to some degree. Requiring Medicaid beneficiaries to pay for a greater portion of their nursing home care might also help, as would encouraging the use of non-institutional alternatives to nursing home care.

HOW ABOUT HOME EQUITY CONVERSION? MR. SCULLY HAS TALKED ABOUT A ROLE FOR REVERSE MORTGAGES. WHAT DO YOU AND HE HAVE IN MIND AND WHAT IS THE CURRENT STATUS?

* A reverse mortgage is essentially a loan based on the equity value of a person's home.

* The loan proceeds can be paid as a lump sum, or in monthly installments, or a combination of the two.

* Reverse mortgages allow people with a considerable amount of equity in their homes to get access to that equity without having to actually sell the home.

* There have been discussions about making people aware that a reverse mortgage may be a way to access the equity in their homes to pay for LTC insurance, rather than relying on Medicaid to finance their LTC needs.

* Currently CMS is looking at what, if anything, we can or should do to make people aware of this possibility. [For example:]

DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid
Services Notice of Grant Award to Promote Reverse Mortgages for Long-Term Care

SUMMARY: The Centers for Medicare & Medicaid Services has awarded a grant entitled ``A Public-Private Partnership to Promote Reverse Mortgages for Long-Term Care'' to the National Council on the Aging (NCOA), 300 D Street SW., Suite 801, Washington, DC 20024, in response to an unsolicited application. The NCOA proposes to work with leaders from the private sector and government to develop a national blueprint for increasing the use of reverse mortgages for long-term care.

The total amount of the award is $295,000 for the period September 30, 2003 through May 30, 2004. The encouragement of reverse mortgages as a means of private sector financing of long-term care expenses for the elderly is a priority issue for DHHS, CMS. Funding of this unsolicited proposal will result in a desirable public benefit based on NCOA's extensive specialized expertise in evaluating long-term care services and financing. The NCOA has a professional staff that is dedicated to understanding the myriad of state and Federal regulations that affect long-term care. NCOA also has many years of experience in defining and developing long-term care issues.

FOR FURTHER INFORMATION CONTACT: Tom Kornfield, Project Officer, Department of Health and Human Services, Centers for Medicare & Medicaid Services, DHSR/ORDI, C3-20-17, 7500 Security Boulevard, Baltimore, Maryland, 21244, (410) 786-8263, or Judith Norris, Grants Officer, Department of Health and Human Services, OICS/AGG/CMS, C2-21- 15, 7500 Security Boulevard, Baltimore, Maryland, 21244, (410) 786-5130.

WHAT IS YOUR POSITION ON MEDICAID ESTATE PLANNING? IS IT TRUE YOU WERE THE AUTHOR OF THE PROVISION IN HIPAA '96 THAT OUTLAWED TRANSFER OF ASSETS? PLEASE TELL THE STORY BEHIND THAT PROVISION AND ITS FATE.

* The Medicaid statute contains a number of provisions designed to discourage such Medicaid estate planning techniques as transferring assets for less than fair market value and placing assets in trusts.

* CMS of course supports the clear intent of these statutory provisions, and works to assist states in their efforts to curb the abusive use of estate planning techniques to qualify for Medicaid payment of nursing home care.

WHAT ARE YOU PLANNING TO DO ABOUT MEDICAID PLANNING IN THE FUTURE?

* Continue ongoing efforts to assist states in curbing abusive estate planning practices.

* Encourage states to submit applications for demonstrations to explore new approaches to curbing abusive practices.

* Could mention annuities contract we awarded in September to study the use of annuities to shelter assets.

WHAT IS THE LIKELY OUTCOME OF WAIVER REQUESTS LIKE THOSE FROM CONNECTICUT AND OTHER STATES TO START THE TRANSFER OF ASSETS PENALTY FROM THE DATE OF APPLICATION INSTEAD OF FROM THE DATE OF TRANSFER (IN ORDER TO ELIMINATE THE HALF-A-LOAF STRATEGY) AND/OR TO EXTEND THE TRANSFER OF ASSETS LOOK-BACK PERIOD BEYOND THREE YEARS (FIVE FOR TRUSTS)?

* Those waiver requests are still under review in CMS; no decisions have been made.

DOES THE AVAILABILITY OF MEDICAID LONG-TERM CARE BENEFITS AFFECT THE MARKETABILITY OF PRIVATE LONG-TERM CARE INSURANCE? HOW?

* The availability of Medicaid LTC benefits clearly affects the marketability of LTC insurance.

* In a sense, Medicaid LTC benefits compete with LTC insurance.

* To the extent that Medicaid LTC benefits are available at relatively little or no cost to the individual (especially because of the use of estate planning techniques), LTC insurance is more difficult to market since such insurance can cost substantially more than individuals might actually have to pay for LTC if they can become eligible for Medicaid.