LTC Bullet:  LTC Embed:  Report from the Policy Front 

Tuesday, March 13, 2007 

Topeka, Kansas-- 

LTC Comment:  I'm in Topeka to give legislative testimony on Medicaid and LTC financing in the Heartland.  

 

LTC BULLET:  LTC EMBED:  REPORT FROM THE POLICY FRONT 

LTC Comment:  Today, I testify before three legislative committees of the Kansas state legislature and meet with the Speaker of the House of Representatives regarding our "Plain(s) Talk on Medicaid and LTC Financing" report.   The Center for Long-Term Care Reform conducted this study with the Flint Hills Center for Public Policy of Wichita, Kansas (www.flinthills.org). 

You can read our report at http://www.centerltc.com/pubs/plains_talk_on_medicaid_ltc_in_kansas.pdf.  My handout for the committee is at www.centerltc.com/MosesHandOut.htm.   

Following are my prepared remarks.  More tomorrow on the outcome of these discussions. 

"Plain(s) Talk on Medicaid and LTC Financing"
by
Stephen A. Moses
for the
Kansas State Legislature
Topeka, KS:  March 13, 2007 

Mr. Chairman and members of the committee: 

Thank you for inviting me to speak with you today about a critical challenge our country and the State of Kansas face. 

I'm here representing the Flint Hills Center for Public Policy and my own organization, the Center for Long-Term Care Reform. 

In a moment, I'll tell you about a study we conducted and a report be published titled "Plain(s) Talk on Medicaid and Long-Term Care Financing." 

But first, let me say that the subject before us today is extremely complicated. 

Both the problem and the solution challenge the intellect and are often counter-intuitive. 

Therefore, I draw your attention to the handout provided.  It directs you to many publications that elucidate this subject. 

Simply go to the first website address provided on the handout.  That will take you to an online version where all the hyperlinks for each of these publications are live. 

Also, my contact information is on the handout.  Please call or email me whenever you have questions or comments on this issue. 

Long-term care is a very expensive proposition. 

Private nursing home rates in Kansas can easily run $100 to $150 a day. 

You might find an assisted living facility for half that, but it still adds up fast and you may end up needing a nursing home in time anyway. 

Would you rather get your long-term care at home?  Even someone to help with chore or attendant services will set you back $10 to $15 per hour.  Figure on more than double that if you need skilled nursing care at home. 

And if you think long-term care is expensive today, just wait two or three decades until the baby boom generation starts needing it.  Whew! 

Of course, you only have to worry about the cost of long-term care if you'll have to pay for it yourself, right? 

Nowadays, in Kansas, and across the United States for that matter, the vast majority of all professional long-term care services are paid for by government programs. 

The lion's share of long-term care costs are paid by Medicaid.  Medicare's a big factor too.  Private insurance and so-called out-of-pocket expenditures are minimal nationally, although relatively high in Kansas. 

The huge role of government in paying for long-term care is why public policy makers are so worried. 

The Flint Hills Center for Public Policy asked me and my organization, the Center for Long-Term Care Reform, to study Medicaid and long-term care financing in Kansas and to recommend some measures to meet this challenge. 

Professor Greg Schneider and I spent a week in July 2006 interviewing 44 experts on every aspect of Medicaid and long-term care in Kansas. 

Our report was published by Flint Hills in September 2006 and is available on their website at www.flinthills.org and on the Center for Long-Term Care Reform's website at centerltc.com. 

In a nutshell, here's what we found. 

Long-term care in Kansas is extremely expensive.  

Medicaid nursing home expenditures went from $109 million in 1980 to $232 million in 2004.  Home care costs rose much faster in the same time period, albeit from a much smaller base:  from $1 million in 1980 to $38 million in 2004. 

I reckon this is what led Senate President Steve Morris to tell us: "The increases of recent years in Medicaid funding are unsustainable for the state." 

Likewise:  Melvin Neufeld, at that time Chairman of the House Appropriations Committee, said:  "The feeling in the House is that we're going to have to get control of this."   

Kansas Medicaid has been very progressive and proactive in funding long-term care. 

Following the lead and recommendations of academics, federal officials and other states, Kansas has moved aggressively to finance lower cost home and community-based services and to reduce the relative utilization of more expensive nursing home services. 

But two things are obvious to anyone who looks at the facts. 

First, overall Medicaid long-term care expenditures remain huge despite the greater focus on home care. 

And second, Medicaid is still the predominant payor for professional LTC services whether in a nursing home or at home. 

In fact, although we found more private financing of long-term care in Kansas than is common elsewhere in the U.S., it's still true that out-of-pocket spending for nursing home or home care in Kansas is the exception instead of the rule. 

Between 10 and 14 percent of people over the age of 50 in Kansas own private insurance that will pay for long-term care.  That's higher than most states, but still much lower than it ought to be. 

The use of reverse mortgages to tap the enormous home equity wealth of seniors in order to fund their long-term care is virtually unknown in Kansas. 

Why is it that the largest share of long-term care financing falls on a fiscally strained public assistance program like Medicaid? 

We found the answer by studying Medicaid eligibility rules and by speaking with the policy specialists and field workers who make the eligibility determinations. 

Bottom line, Medicaid-financed long-term care in Kansas is easy to obtain.  Despite the conventional wisdom that Medicaid is welfare with draconian income and asset spend-down requirements, the truth is very different. 

Anyone with income below the cost of nursing home care qualifies based on income. 

There is no limit on assets held in exempt form, such as home equity up to $500,000 plus a car, business, term life insurance, home furnishings, and prepaid burial expenses of any value. 

Married couples get even more generous income and asset eligibility rules allowing a healthy spouse in the community to retain more than $2500 per month of the institutionalized spouse's income and more than $100,000 of their joint assets.   

And of course, if you have way too much money for Medicaid, you can hire one of the legal or financial advisors who specialize in artificial self-impoverishment to qualify. 

We Googled "Medicaid planning in Kansas" and got over one million hits.  Here's an example of the kind of thing you're likely to hear from a Medicaid planner: 

"For someone who is pursuing Medicaid eligibility, following are the types of spend-down items, in no particular order, which should be considered: Purchase pre-paid funeral plans. . .  Purchase a new car. . . Purchase of a new home. . . . Make home improvements. . .  [Take a ] Vacation. . . . Believe it or not, the entire cost of that vacation can come out of the nursing home spouse's spend-down. . . .  [D]on't let anyone tell you that anything spent must be done solely for the benefit of the nursing home spouse. . . .  Finally, keep in mind that while some of these spend-down strategies will not work as well for a single person qualifying for Medicaid, there are other strategies that can work equally well, no matter whether you are dealing with a single person or a married couple. Contact our offices to speak with an experienced elder law attorney for guidance." 

Medicaid long-term care eligibility is way too complicated for me to explain in the time available today, but my goal right now is only to pique your interest and persuade you to read our report. 

So, here's what we concluded and what we recommend. 

Long-term care in Kansas IS hugely expensive and will become far more so as time goes on and the Baby Boom generation ages. 

Government programs like Medicaid and Medicare can't continue to pay most of the cost of formal long-term care. 

Medicare, for example, has a $71 trillion unfunded liability.  It won't continue to cover as much long-term care as it has in the past. 

Social Security has a $15 trillion unfunded liability.  It won't be able to offset such a large portion of Medicaid long-term care costs as it has in the past. 

Something must be done to attract new sources of long-term care financing into the system to supplement and relieve the fiscal pressure on Medicaid and Medicare. 

There are only three such sources of new financing:  out-of-pocket expenditures, long-term care insurance, and home equity conversion or reverse mortgages. 

But no one can reasonably expect the public to plan early and save, invest or insure for long-term care when they can ignore the risk, avoid the premiums for private insurance, wait to see if they ever need long-term care and then easily pass most of the financial liability on to Medicaid while passing their wealth, mostly home equity, on to heirs. 

So, the solution is to target Medicaid to people most in need, tighten income and asset eligibility rules, recover from recipients' estates, and use the savings to educate the public and incentivize them to insure privately for long-term care or use reverse mortgages to fund their care. 

To do anything else is to leave Medicaid what it has become today:  free inheritance insurance for the baby boom generation. 

Luckily, the federal government put a lot of new tools in states' hands last year to reform Medicaid. 

The Deficit Reduction Act of 2005, enacted into law February 8, 2006, requires states to: 

Extend the look-back period from 3 to 5 years for uncompensated asset transfers done to qualify for Medicaid . . . so we recommended that you implement that change and publicize it so people know LTC is a personal responsibility. 

Incidentally, the comparable look-back period in Germany is 10 years. 

The DRA also required state Medicaid programs to start any asset transfer penalty at a later date than before in order to end the most common Medicaid planning gambit--the half-a-loaf strategy . . . so we recommended you implement this immediately to discourage that common place practice of gaming the system. 

But we also recommended that you implement the DRA's stronger undue hardship rules just in case someone unintentionally gets stuck with an unfair asset transfer penalty. 

We suggested you cap Medicaid's previously unlimited home equity exemption at $500,000 instead of opting for $750,000 as the DRA allows.  After all, even that lower limit is 14 times as much as Great Britain, another socialized health care system, allows. 

We also recommended that you: 

Immediately, discourage the use of annuities to self-impoverish to qualify for Medicaid as mandated by the DRA. 

Implement a Long-Term Care Partnership Program as authorized by the DRA. 

And resist the temptation to utilize the DRA's new authorities regarding expansion of HCBS unless and until you get the Medicaid eligibility system under control. 

Finally, we recommended that you conduct studies to find out why people don't plan for long-term care, to explore private financing alternatives like insurance and home equity conversion, and to increase non-tax revenues from Kansas' lien and estate recovery programs. 

So, Mr. Chairman and members of the committee, I do encourage you to read our report and to examine the other studies documented on my handout. 

And if this subject interests you, please feel free to visit the Center for Long-Term Care Reform's website at www.centerltc.com where you'll find many articles and reports explaining these issues in much greater detail. 

Thanks for your attention.