LTC Bullet: Medicaid Estate Recover. . .up
Thursday, July 5, 2007
Medicaid estate recovery could be a major source of non-tax revenue for
the ailing LTC safety net for the poor, but AARP would tie the program in
LTC BULLET: MEDICAID ESTATE RECOVER. . .UP
LTC Comment: Listen up, folks. This is important. According to studies conducted by the National Bureau of Economic Research, Medicaid crowds out between two-thirds and 90 percent of the market for private long-term care insurance. (See for example: http://www.nber.org/papers/w10989). What follows is a big part of the reason why this is true.
AARP has published another of its occasional reports downplaying the importance of Medicaid estate recoveries and urging additional restrictions on the program.
Check out "Protections in Medicaid Estate Recovery: Findings, Promising Practices, and Model Notices" by Erica F. Wood, Ellen M. Klem, and the ABA Commission on Law and Aging, AARP Public Policy Institute, Washington, DC, May 2007 at http://assets.aarp.org/rgcenter/il/2007_07_medicaid.pdf.
Following is a sample of excerpts from the report followed by our comments and analysis:
AARP: "By law, states can collect funds from estates after institutionalized or older Medicaid beneficiaries die by recovering against their homes and bank accounts to repay the government for services received." (p. ii)
LTC Comment: This quote from the second paragraph of the report's "Foreword" displays its bias. Medicaid does not recover "against . . . homes and bank accounts." It recovers funds from estates to reimburse Medicaid for costs incurred so that the same funds do not pass as "free," welfare-financed inheritance insurance to heirs who did not pay for their parents' long-term care.
AARP: "Estate recovery makes the Medicaid program very different from the vast majority of federal programs, which do not require such repayment." (p. ii)
LTC Comment: The "vast majority of federal programs, which do not require such repayment" are social insurance programs like Medicare and Social Security. You pay a premium and you're entitled to a benefit. Medicaid is welfare; you pay no premium and you're entitled to no benefit that is not reimbursed from your estate. It's the law.
AARP: "AARP is publishing this research to clarify the protections in Medicaid estate recovery programs, to encourage strong and effective protections, and to put forth promising practices and model notifications that can be replicated throughout the country." (p. ii)
LTC Comment: Here we agree. In fact, we'd go much further. State Medicaid programs should shout it from the rooftops that LTC financing is not a personal entitlement, that paying for long-term care is a personal responsibility, and that anyone who relies on public welfare to pay for LTC will absolutely, positively pay it back out of his or her estate before any remaining wealth passes to heirs as a tax-payer-financed windfall. Unfortunately, that's not what happens and the "protections" recommended by AARP are meant to hamstring Medicaid estate recoveries more than to facilitate them.
AARP: "Recovery amounts are increasing at a modest rate, and the financial impact of estate recovery on state budgets remains slight but not insignificant. Amounts collected through estate recovery represent between 0.01% and 2.09% of total state long-term care Medicaid expenditures, with only six states above 1%. The average proportion has remained constant at 0.61% (FY 2005), compared with 0.63% (FY 2003) two years earlier, as reported in the 2005 study. The amount recovered nationally in FY 2005 was $411,133,981—almost $81 million more than in FY 2003. The average state recovery was $8,061,451, compared with $6,477,206 in FY 2003." (p. v)
LTC Comment: What if every state recovered from estates at the same rate as the best state (2.09%)? How much less would Medicaid depend on taxes? Or how much more would the program have to spend on desperately need care? The answer is one billion four hundred and eight million dollars! That's real money! But search the AARP report from beginning to end and you'll find nothing to encourage underperforming Medicaid estate recovery programs to improve and increase their contribution to the welfare program's scarce resources.
AARP: "Fifty of the 51 states (including the District of Columbia) have a Medicaid estate recovery program. As of this writing, Michigan had no program, and Georgia was in the process of implementing one. New Mexico reported an inactive program." (p. v)
LTC Comment: In other words, 14 years after Medicaid estate recovery was made mandatory by OBRA '93, two states still ignore the requirement entirely. Why does the federal government allow those states to receive federal matching funds when they are out of compliance with federal law? The feds have been lax in that regard from the beginning. The rest of the story is that Texas only recently implemented estate recoveries and most states do not enforce recoveries aggressively. The Centers for Medicare and Medicaid Services (CMS) has not sponsored a conference on Medicaid estate recoveries since the year 2000. Such a meeting should be scheduled immediately. How else can practitioners of this complicated specialty learn from the successes and failures of each other?
Federal taxpayers bear the brunt of the state and federal government's carelessness about Medicaid estate recovery. That's the real issue that needs studying. But don't hold your breath waiting for AARP or anyone else to do the job. It is too politically sensitive: much easier to paper over these problems with more government spending than to tackle them with responsible public policy.
TRIPLY TAXED: Just remember who gets the bill. Responsible Americans pay once in taxes to support Medicaid, then they pay again for their own LTC insurance premiums, and then again in higher private-pay rates for their long-term care to make up for Medicaid's dismally low reimbursements. As Jane Bryant Quinn asked once long ago in her Newsweek column: "Do Only the Suckers Pay?"
AARP: "Estate recovery and accompanying lien policies directly affect specific individuals—frail residents of long-term care facilities whose homes are subject to liens, surviving spouses, and other family members or potential heirs of deceased Medicaid recipients." (p. xi)
LTC Comment: This statement is at best misleading; at worst, false. Liens cannot be placed on an institutionalized Medicaid recipient's property unless and until it has been determined that the recipient is medically unable ever to return to the home. No estate recovery can be made (obviously) until after the recipient dies and therefore has no further use for the real estate equity. No estate recovery can be made until after the death of a surviving spouse. Of course there is an impact on "other family members or potential heirs of deceased Medicaid recipients." The purpose of Medicaid is not to indemnify them for the cost of their relatives' long-term care. If that were the case, why would anyone ever plan, prepare or insure for the risk and cost of long-term care?
AARP: "The highest percent decreases were in Delaware (-100%), Washington (-95%), and Oregon (-92%)." Explanation in End Note #32: "According to Medicaid officials in Washington and Oregon, amounts recovered actually increased between FY 2003 and FY 2005."
LTC Comment: Nothing in the whole report annoyed me more than this. Oregon has one of the best (if not arguably THE best) estate recovery program in the United States. Back in the 1980s, when I studied the program for the Health Care Financing Administration and the Office of Inspector General of the U.S. Department of Health and Human Services, Oregon recovered $5 million dollars per year from estates. For the 2007-09 state budget biennium, Oregon estimates annual recoveries will be over $20 million per year. Yet AARP left all but a tiny fraction of Oregon's and Washington's estate recoveries out of the current report because of glitches in some federal reporting form. I captured Oregon's actual recoveries for the reporting period with a simple phone call. AARP could have reported the same, complete, accurate facts.
If you'd like to learn more about Medicaid estate recoveries and the critical role they could and should play in funding quality long-term care for people in need, following are some resources to check out:
"The Medicaid Estate Recoveries Study," draft November 1985 at http://www.centerltc.com/mer_study.pdf: I wrote this report for the Health Care Financing Administration. It inspired national studies by the GAO and the DHHS OIG.
"Medicaid Estate Recoveries: National Program Inspection," June 1988 at http://oig.hhs.gov/oei/reports/oai-09-86-00078.pdf: I wrote this report for the DHHS Office of Inspector General. Many of its recommendations became law in OBRA '93, including the provision making Medicaid estate recoveries mandatory for all state Medicaid programs.
"Medicaid: Recoveries from Nursing Home Residents' Estates Could Offset Program Costs," March 1989 at http://archive.gao.gov/d15t6/138099.pdf: Excellent GAO report.
"LTC Bullet: The Critical Role of Medicaid Estate Recoveries," September 30, 2005" at http://www.centerltc.com/bullets/archives2005/579.htm.
For more: search LTC Bullet archives at http://www.centerltc.com/bullets/date.htm for "Medicaid estate recovery" and/or "Medicaid estate recoveries."
Bottom line: Medicaid estate recoveries help preserve the LTC safety net for the poor and encourage responsible long-term care planning for everyone else. By discouraging estate recoveries, AARP hurts America's neediest, and ironically, impedes the marketability of the organization's own LTC insurance product. Go figure!