LTC Bullet: The Critical Role of Medicaid Estate Recoveries
Friday, September 30, 2005
LTC Comment: Read an op-ed on the value of Medicaid estate recoveries plus an introduction and link to new research on the history and importance of the program.
LTC BULLET: THE CRITICAL ROLE OF MEDICAID ESTATE RECOVERIES
LTC Comment: Roger A. Van Etten and Brian M. Vazquez of the Kansas Division of Health Policy and Finance have written a comprehensive history of Medicaid estate recoveries with a focus on the program in Kansas. Read, download and/or order a free hard copy of the four-volume series at http://www.flinthills.org/. The Flint Hills Center for Public Policy published the "Kansas Estate Recovery Primer."
Following is Steve Moses's preface to the new publication:
Preface to the Kansas Estate Recovery Primer by Stephen A. Moses, President Center for Long-Term Care Reform
The marvel of Medicaid estate recovery is that it permits people to get the long-term care they need from Medicaid when they need it without devastating themselves financially. Basically, Medicaid recipients' estates are collateral for a loan from the program to help them cope with the high cost of long-term care. The only quid pro quo is that people who rely on Medicaid to fund their long-term care have to pay back this loan from the government after they (and their last surviving exempt dependent relatives) die.
Folks who don't like that eminently fair deal, can buy private long-term care insurance or pay for their long-term care through a reverse annuity mortgage on their home. Without estate recoveries, people have no incentive to pay for their own long-term care, but Medicaid cannot carry the cost of paying for everyone. What kind of a message does it send to the giant baby-boomer generation if they can ignore the risk of long-term care for their parents, pass on the cost to tax-payers, and still collect an inheritance protected by public welfare?
Without estate recovery, Medicaid becomes inheritance insurance for baby boomers which anesthetizes them to the need to plan and prepare for the cost of long-term care. Yet, Medicaid estate recovery is the poor relative of government programs. Like Rodney Dangerfield, it just can't seem to get any respect. Reviled as "the other death tax" . . . pooh-poohed as a dry well for program savings . . . ignored as a subject for serious research . . . Medicaid estate recovery has suffered from decades of neglect. Until now!
We all owe a hearty vote of thanks to Roger Van Etten and Brian Vazquez for writing the "Kansas Estate Recovery Primer" and to the Flint Hills Center for Public Policy for publishing it. This four-part series covers the history of Medicaid estate recovery nationally and in the State of Kansas. Volume 1 is titled "Estate Recovery's Roots in Social Security, Medicare and Medicaid," while Volume 2 is "A National History of Estate Recovery." Volume 3 ("Estate Recovery in Kansas: 1930s - 2004") and Volume 4 (Estate Recovery after Senate Bill 272) discuss Medicaid estate recoveries in Kansas before and after recent state legislation.
I sincerely hope that the availability of this publication on Flint Hills' website at http://www.flinthills.org/ will spur other researchers and authors to take a closer look at Medicaid estate recoveries. Why does it matter? Who cares? I tried to answer those questions in the following op-ed article.
"Medicaid Estate Recoveries: The Fiscal Necessity, The Moral High Ground," by Stephen A. Moses, President, Center for Long-Term Care Reform
State officials are "picking the bones of the elderly."
That's how one critic described "estate recoveries," the mandatory recoupment of benefits legally paid by Medicaid from the estates of deceased recipients.
But, like most things in life, it isn't that simple. Here's a primer and fair warning about a government program that is almost certain to touch you or a loved one sooner or later . . . unless you take the proper financial planning steps to avoid it.
Medicaid is a means-tested, public assistance program. In other words, welfare.
Medicaid is very expensive. Nationally, it will cost over $300 billion in 2005, even more than Medicare. At the state level, Medicaid now costs more than primary and secondary education combined.
Medicaid is a critical health care safety net for poor women and children. But the program is also the primary third-party payor for "long-term care," the mostly custodial assistance critically needed by frail or infirm elderly and disabled people.
Long-term care consumes a disproportionate share of Medicaid expenditures. While three-fourths of Medicaid recipients are poor children or adults, they consume only one-third of the program's costs. On the other hand, one-fourth of Medicaid recipients are aged, blind or disabled, but they consume two-thirds of Medicaid expenditures, mostly for long-term care.
Why should you care?
Many reasons, the first and foremost of which is: you are paying for Medicaid long-term care with your state and federal taxes. Maybe you should feel good about that. After all, Medicaid is America's safety net that ensures access to long-term care for the vulnerable poor.
But, wait. Medicaid has become much more than that. It is the principal payor of long-term care for nearly everyone, including many of the well-to-do.
How can that be true if Medicaid is welfare?
Over the years, Medicaid eligibility "bracket creep" has expanded the program to cover even upper-middle-class people whom it was never intended by Congress to serve.
For example, income is rarely an obstacle to Medicaid long-term care eligibility because all medical expenses, including expensive nursing home costs, are deducted from people's income before their Medicaid eligibility is determined.
Assets are limited to $2,000 except that home equity, one business, an automobile, prepaid burial costs, and term life insurance are exempt in unlimited amounts. Many additional assets are exempt in limited amounts.
On top of all that, thousands of attorneys and financial planners specialize in sophisticated techniques to impoverish their affluent clients artificially for the purpose of qualifying them for Medicaid long-term care benefits.
Bottom line, there is no limit on how much income or assets people can have while receiving Medicaid long-term care benefits as long as their medical expenses are high enough, their assets are held in exempt form, or they hire a "Medicaid planner."
Now, I know what you're thinking! "You mean I can ignore the huge potential risk and cost of long-term care, avoid the premiums for private insurance, keep most of my wealth, and the government will pay if I ever need care? Sounds pretty good to me."
Not so fast. Leaving aside the critical fact that Medicaid has a dismal reputation for problems of access, quality, reimbursement, discrimination and institutional bias, there are other critical downsides for you to consider.
Ever since 1993, the federal government has required state Medicaid programs to recover the cost of their care from the estates of deceased recipients. Most states have not pursued such "estate recoveries" aggressively heretofore, but that is changing as Medicaid's enormous fiscal pressure on the state and federal coffers continues to mount.
Count on government at all levels to clamp down more and more on Medicaid eligibility and to pursue estate recoveries far more enthusiastically. Their goal is to make sure Medicaid survives as a safety net for the poor without bankrupting taxpayers and the economy. Increasingly, everyone with any significant wealth will be expected to plan early for long-term care; save, invest or insure against that risk; and pay their own way when the time comes.
When the massive baby boom generation finally needs long-term care, Medicaid will not be an option for any but the most needy, if it survives at all. In the future, the only way to obtain quality long-term care, especially in the preferred settings of one's own home or an assisted living facility, will be to pay privately. The only way to pay privately will be to own private long-term care insurance or to spend your own wealth including your home equity.
So, here's the bottom line about Medicaid estate recoveries.
First: estate recoveries are a fiscal necessity to preserve Medicaid as America's long-term care safety net for the poor.
Second: if you want to preserve your own wealth against the cost of long-term care, don't expect a free ride on the public welfare system. Plan to use your home equity or buy private long-term care insurance.
Those precepts represent the fiscal necessity and the moral high ground of Medicaid estate recovery.
Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, Washington. The Center's mission is to ensure quality long-term care for all Americans. Steve Moses writes, speaks and consults throughout the United States on long-term care policy. Learn more at www.centerltc.com or email email@example.com.