LTC Bullet:  Medicaid Budget Reconciliation Sneak Peek 

Tuesday, September 20, 2005 

Seattle-- 

LTC Comment:  The House Energy and Commerce Committee is writing legislation to save Medicaid $10 billion over five years AND improve the program in the process.  Wanna know what they're planning?  After the ***news.*** 

*** WHEN WILL WE SEE GAO'S TOA REPORT?  On September 2, 2005, the Government Accountability Office released its report on transfer of assets in the Medicaid program to the study's Congressional requestors, including Congressmen Waxman and Dingell.  Those Democratic legislators have the prerogative to hold the report up to 30 days before making it public.  So far, to our knowledge, they're sitting on it.  One wonders why they would withhold this important study and its findings given that House and Senate committees are desperately seeking ways to contain Medicaid's skyrocketing costs by curtailing Medicaid planning abuses (including asset transfers).  Could it be that GAO exposed serious TOA abuses instead of delivering the ho-hum, no-big-deal findings the requestors anticipated?  We'll let you know as soon as the report is released and publicized. *** 

***  JOIN THE CENTER FOR LONG-TERM CARE REFORM.  If you enjoy these LTC Bullets, you'll love everything else the Center for Long-Term Care Reform has to offer.  Check out our public website at www.centerltc.com for numerous publications, reports, speeches, LTC Bullets archives and webcasts.  But if you want the inside scoop, join the Center as a dues-paying member.  That will get you access to our Members Only Website Zone, our daily LTC E-Alerts including Steve Moses's popular "LTC Embed Reports from the Policy Front," and an open invitation to contact Steve directly on his personal email or cell phone whenever you have a question or comment on LTC policy.  How to join?  It's easy.  Go to http://www.centerltc.com/support/index.htm or simply contact Damon at 206-283-7036 or damon@centerltc.com.  Dues are $150 per year or $12.50 per month, a tiny cover charge for admission to the very center of LTC policy development. *** 

LTC BULLET:  MEDICAID BUDGET RECONCILIATION SNEAK PEEK 

LTC Comment:  Everyone who cares about Medicaid and long-term care financing has been on pins and needles waiting to see what Congress will do this year. 

Now we have a glimpse.  Yesterday, House Energy and Commerce Committee staff tipped their hand to State Policy Network members (and invited guests) on a conference call.  (State Policy Network is the professional service organization for America's free market, state-based think tanks:  www.spn.org.) 

Despite delays caused by Hurricane Katrina complications, E&C hopes to have its budget reconciliation package out of committee by mid-October. 

In the meantime, Committee staff are looking for "feedback and tweaks" from "conservative and free market allies" to enhance "market and competition solutions."   

They anticipate vociferous opposition from all groups that favor expanding government over private sector solutions.  So they seek to design, and mobilize support for, the best possible package of free market-oriented proposals.  Their objective is not just to save money but to improve Medicaid. 

Here's how the conference call briefing was introduced:   

Background:  On April 28, 2005, Congress passed a Conference Agreement on the Fiscal Year (FY) 2006 Budget which calls for a $14.734 billion reduction in outlays under the jurisdiction of the Energy and Commerce Committee for FY06-FY10.  It is anticipated $10 billion of these savings will come from Medicaid, although no Medicaid savings are assumed in FY06.  Energy and Commerce staff have been working closely with the National Governors Association and several reform-minded governors individually to craft policy proposals to strengthen and improve the program while achieving savings at both the federal and state level.  

Committee staff identified four major areas for Medicaid reform. 

1.  Cost sensitivity through cost sharing. 

2.  Make Medicaid more like a health insurance benefit.  Give states flexibility. 

3.  Drug reimbursement. 

4.  Asset transfers and eligibility for long-term care. 

The fourth category (asset transfers and LTC eligibility) especially interests us and that's where Committee staff provided the most detail. 

Here's what they have in mind: 

Move the look back period for asset transfers from three to five years so it mirrors the current look back for transfers to trusts.   

Change the date when the penalty period for uncompensated asset transfers begins. Currently, the penalty period begins when the transfer is made.  That allows penalty periods often to expire before application for Medicaid is made.  Both the Administration and the National Governors Association proposed starting the penalty period instead when a person applies or would otherwise have become eligible for Medicaid.  That's what the Committee is likely to propose.  Nursing home groups are concerned that this change could force them to provide more uncompensated care.  Committee staff are giving this concern very serious consideration. 

The Committee is looking carefully at financial instruments that Medicaid planners use to impoverish their clients artificially, such as annuities.  Annuities have been abused for a long time as instruments to qualify for Medicaid LTC benefits without spending down for care.  People transfer large chunks of money into annuities thus changing the assets from countable into non-countable resources.  The main idea is to put state Medicaid programs in the position of the primary beneficiary in such annuities, so that the money doesn't disappear and Medicaid is reimbursed for care provided. 

Besides controlling the abuse of annuities, the Committee contemplates giving the Secretary of Health and Human Services broad authority to look at and control all sorts of instruments used by Medicaid planners to qualify people for Medicaid by dodging income and asset limits. 

Another possibility under consideration is to put a limit on the amount of home equity that can be exempted while qualifying for Medicaid long-term care benefits.  Currently, there is no limit whatsoever on home equity.  Several members of the Committee are sympathetic to placing some limit.  They say "enough is enough."  The level of the limit is still under discussion. 

In addition to discouraging Medicaid planning abuses, the Committee is considering positive measures to encourage the public to plan for long-term care expenses.  The most likely proposal in that regard is to expand LTC partnership programs by lifting restrictions in effect since 1993 so all states can participate.  Committee staff would also like to encourage reciprocity between LTC partnership states, but that is very complicated to do.   

Next, Committee staff turned briefly to the other main categories of proposals they have under consideration.  For example, cost sharing.  Medicaid has no real cost sharing.  The statute currently allows nominal cost sharing up to $3, but that has no effect because recipients are not required to pay it.  One possibility under consideration is to allow governors to impose cost sharing on some categories of recipients.  The main objective is to make people aware there are often less costly and better alternatives for care, such as seeing a regular doctor instead of relying on emergency room visits.  

Benefit flexibility would not apply to the more vulnerable populations.  Rather, would allow states to vary benefit packages according to some benchmark.  Make it easier for states to put people into managed care or employer plans. 

Changing how Medicaid pays for prescription drugs.   The main idea is to get away from AWP (average wholesale price) and go to something more realistic.  Create incentives for manufacturers to move to a more competitive plan like Arizona's. 

Also considering health savings accounts for some recipients and incentives for more fraud and abuse controls in response to horror stories from New York. 

Health information technology advancements. 

The foregoing, in a nutshell, are some of the ideas for Medicaid reform that House Energy and Commerce Committee staff are considering. 

A brief Question and ANSWER period followed this presentation. 

Someone asked if the Committee had considered reforming the Medicaid federal funds matching system that encourages states to "game" the program by leveraging up their federal match with creative financing techniques.  Why not implement a block grant?   

THE ANSWER WAS THAT THEY COULD NOT GET CONSENSUS FOR A BLOCK GRANT.  INSTEAD, THEY ARE TRYING TO GET AT THE PROBLEM BY IMPROVING INCENTIVES FOR STATES TO CONTAIN COSTS. 

Steve Moses asked whether the Committee had any specific dollar amount in mind for a  home equity exemption limit.   

THE ANSWER WAS THAT THE COMMITTEE WOULD CONSIDER THE LIMIT PROPOSED BY THE NATIONAL GOVERNORS ASSOCIATION, SPECFICALLY $50,000 OR 10% OF THE HOME'S VALUE, WHICHEVER IS LESS.  "BUT WE DON'T KNOW IF THE COMMITTEE CAN GO THAT LOW." 

That concluded the SPN conference call on Medicaid reform.  The Center for Long-Term Care Reform wishes to thank the State Policy Network for the opportunity to participate in this briefing.