LTC Bullet: The Age Wave, The Ocean State, and Long-Term Care

Thursday, September 3, 2009


LTC Comment: Rhode Island's "global Medicaid waiver" combines opportunity and danger, but it could become a long-term care model for the country. No ***news*** today. Please go straight to the story!



LTC Comment: Last May, I described a "unique LTC reform opportunity." I called it "the fire engine we've been waiting for to fix long-term care." I invited readers to fund a study so we could better understand the opportunity and propose ways to make the most of it. Enough of you responded with generous donations and we now have a "deliverable" to show for it.

Please read the full report, titled "The Age Wave, the Ocean State, and Long-Term Care" here. Note that all the people interviewed for the study are listed at the end of the text. After the following highlights, we'll recognize the individuals and companies that supported this work with their contributions. They are also recognized and thanked in the report's "Appendix."

We want particularly to thank Bill Felkner, president of the Ocean State Policy Research Institute (OSPRI, and his staff for their active collaboration and assistance with this project. Also, kudos to Damon for the stunning graphic of the cover.


Highlights from "The Age Wave, the Ocean State, and Long-Term Care," by Stephen A. Moses, published September 2, 2009 by the Center for Long-Term Care Reform, Seattle, Washington.

Executive Summary: Rhode Island's unique "global Medicaid waiver" pursues a potentially dangerous national policy trend: long-term care (LTC) rebalancing without strong eligibility controls. Given the state's already grave budget crisis, potentially explosive increases in Medicaid costs incidental to the global waiver could seriously damage Rhode Island's social safety net. Policy makers can maximize the global waiver's opportunity, minimize its danger, and become a LTC financing model for the country. To do so, they will need to recognize the issues discussed in this report and pursue the recommended additional research and analysis.


Issue 1: Rhode Island's Medicaid long-term care financial eligibility rules allow most people to qualify for LTC benefits without spending down significant assets.

Recommendation: Conduct the additional research suggested below and pursue corrective action under the global waiver to target scarce Medicaid resources to people most in need.


  1. Anyone (over 65 and medically qualified) with income below the cost of a nursing home ($7,777 per month) qualifies for Medicaid LTC benefits in RI based on income. The state has only twice ever denied LTC eligibility to an applicant because of excess income.

    Research needed: Identify ways under the global waiver to target benefits more cost-effectively to lower income people.

  2. Applicants qualify for Medicaid LTC benefits with, and recipients may retain, unlimited exempt assets, e.g. home equity up to $500,000 and, without any dollar limit: one business including the capital and cash flow, one automobile, prepaid burial plans, term life insurance, home furnishings and other exempt assets.

    Research needed: Identify ways under the global waiver to target benefits more cost-effectively to genuinely needy people.

  3. Medicaid estate planning (artificial impoverishment of affluent seniors to qualify them for Medicaid's LTC and other benefits) is rampant in Rhode Island. State eligibility staff report half of Medicaid LTC recipients have done some form of Medicaid planning to qualify.

    Research needed: Identify the Medicaid planning methods used and quantify the costs to the state and federal government from techniques like "reverse half-a-loaf," purchase of "life estates," irrevocable income-only trusts, legal (beyond the 5-year look back) and illegal (fraudulent) transfers of assets, purchase of exempt assets and many other less common practices.

  4. Rhode Island permits "mail-order" Medicaid eligibility so that 60% of all applicants are not seen face-to-face and 85% of all applications are completed by someone other than the applicant, often by an attorney with a financial interest in the case.

    Research needed: Examine this practice and estimate the savings to the state of closer and stronger eligibility monitoring.

  5. Rhode Island intends to use the same eligibility criteria and methods of determination under the global Medicaid waiver for HCBS (which people want) as it uses for nursing home care (which most people prefer to avoid).

Research needed: Examine the potential increased costs this practice will likely entail and propose initiatives to reduce them.

Issue 2: Rhode Island's Medicaid program does not fully recover benefits correctly paid from liens or estate recoveries. To that extent, the program is defacto free inheritance insurance for heirs against the risk of their parents needing long-term care.

Recommendation: Identify, document and quantify methods by which Rhode Island can discover, secure, and recover the cost of LTC benefits paid to people with exempt (sheltered) assets out of their estates or from liens on real property. Propose corrective actions allowable under the global waiver.


  1. Rhode Island does not pursue TEFRA liens, so the state is unable to track and secure recipients' largest exempt asset, home equity, during the period of their Medicaid LTC eligibility.

    Research needed: Explore the potential savings for RI from the use of property liens as authorized by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA '82) and examine potential expansion under new authority granted by the global waiver.

  2. The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) required state Medicaid programs to pursue recovery of program benefits correctly paid to anyone 55 years of age or older out of the person's estate or the estate of the person's last surviving, exempt, dependent relative (usually a spouse.) RI does not pursue this non-tax revenue source aggressively having cut staff and collected only $2 million in the past year.

    Research needed: Examine estate recovery programs in other states (especially Oregon) to show how Rhode Island can recover at least $15 million per year from this source. By so doing, the state should be able to achieve even greater savings from cost avoidance as consumers plan more responsibly to pay privately for LTC in order to stay off Medicaid and avoid estate recovery.

  3. Besides not utilizing TEFRA liens and underutilizing estate recovery, Rhode Island has no uniform probate code law, no enhanced definition of "estate" as authorized by OBRA '93, no way to track deaths and estates systematically, no method to ensure recovery of recipients' "nursing home accounts" (up to $4,000), and no recoveries at all from home care benefits which are likely to explode under the global waiver.

Research needed: Research and propose a combination of state legislative initiatives and program changes to address these specific deficiencies and improve RI's non-tax revenue from these sources.

Issue 3: As Rhode Island's Medicaid long-term care program rebalances from heavy coverage of institutional services (nursing home care) to vastly more home and community-based care (HCBS), total program costs may increase rapidly.

Recommendation: Identify, explore and quantify the risks and cost of rebalancing. Consider why measures to reduce excessive program eligibility may be critical to maintain cost-effectiveness under this global waiver initiative.


  1. Rhode Island's global waiver proposes to reduce nursing home dependency by providing services in the community (HCBS) to more people at less cost.

    Research needed: Find, enumerate and elucidate the extensive literature that demonstrates HCBS will not save money. Use this information to develop ways that total costs can be reduced while funding less nursing home care and more HCBS by controlling eligibility, maximizing estate recovery, and encouraging private financing of long-term care.

  2. RI Medicaid historically and currently provides LTC benefits mostly in nursing homes (90%) and much less in HCBS (10%). The state plans under the waiver to expand HCBS vastly and reduce nursing home care. Yet nursing homes have already lost 1200 beds statewide; seen their occupancy decline from 97% to 90%; and suffered reimbursement cuts so that current Medicaid payments are now $16.21 per bed day (12 percent) less than allowable costs, while their Medicaid census has increased to 73% and their private-pay census has plummeted to 10%.

    Research needed: Explore these problems and propose solutions that avoid further damaging an already fragile service delivery system.

  3. The Rhode Island global waiver contemplates assisted living facilities (ALF) and home care providers picking up the extra care recipients who will no longer qualify for nursing home care due to increased acuity of care requirements. Yet few ALF beds are available in the state and home caregivers are in very short supply. ALF and home care providers say Medicaid pays too little to enable them to provide services to the kinds of higher-need recipients under the global waiver who otherwise would have received care in nursing homes.

Research needed: Examine and quantify these problems and suggest ways to eliminate them by improving Medicaid eligibility, estate recovery and public education programs.

Issue 4: Medicaid is the dominant payer for long-term care in Rhode Island because easy eligibility, almost nonexistent estate recovery, and a lack of positive incentives for private financing alternatives has left the public largely unaware of the need to plan, save, invest or insure for long-term care risk and cost.

Recommendation: Develop a plan to implement, integrate and publicize stricter income and asset eligibility rules, stronger lien and estate recovery policies, and the need for consumers to plan early and save, invest or insure for long-term care. Use some of the resulting savings to educate the public about long-term care planning and private LTC financing options.


  1. Despite widespread home ownership and high property values in Rhode Island, reverse mortgage lenders report that borrowers rarely (perhaps 5%) use the proceeds of home equity conversion to pay privately for home care and related medical and custodial services.

    Research needed: Determine to what extent Rhode Island's $500,000 home equity exemption encourages Medicaid use and discourages home equity conversion as a means of financing LTC privately. Estimate potential savings to the state of limiting the home equity exemption and incentivizing the use of reverse mortgages to fund home care. (See especially the National Council on the Aging's study titled "Use the Home to Stay at Home.")

  2. Long-term care insurance producers in Rhode Island report that too few policies are in force; the market is flat or down; the state has no tax incentives to encourage the purchase of LTC insurance; Medicaid planning after the insurable event has occurred is commonplace; and, although RI has approved a "long-term care partnership" program, no policies are being sold.

Research needed: Carefully examine and consider implementing policies to encourage early LTC planning, utilize tax incentives for the purchase of private insurance for long-term care, and eliminate Medicaid eligibility policies that have the effect of anesthetizing the public to the risk and cost of LTC.


Rhode Island's current plan under the global Medicaid waiver to expand home and community-based services while reducing nursing home use without controlling the state's wide-open LTC eligibility system is, however unintentionally, highly likely to increase costs and undermine private-sector LTC financing sources.

Careful study and further review of the issues raised in this report will identify corrective actions that can reduce costs by targeting Medicaid benefits under the global waiver to people most in need and by encouraging private, market-based solutions based on savings, investment and insurance to fund long-term care.


The following individuals and/or their companies contributed financially to support our work on this project in Rhode Island.

Keystone ($5,000): Thomas Campbell Jackson

Foundation ($1,000 to $500): Rick Leonard; Sue Howarth; Phil Sullivan; Steve Forman

Building ($250 to $50): Claude Thau; B.J. Randolph; Bill Dorfii; Eve Anderson; Teresa Eagan; Sally Leimbach; Honey Leveen; Alan Jonas; Kyle Hitt; Annemiek Storm; Bob Callanan; Heady Nezhadpour.