LTC Bullet: The Age Wave, The Ocean State, and Long-Term Care
Thursday, September 3, 2009
Seattle--
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 BULLET: THE AGE WAVE, THE OCEAN STATE, AND LONG-TERM
CARE
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,
www.oceanstatepolicy.org)
and his staff for their active collaboration and assistance with this
project. Also, kudos to Damon for the stunning graphic of the cover.
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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.
Findings:
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.
Facts:
- 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.
- 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.
- 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.
- 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.
- 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.
Facts:
- 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.
- 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.
- 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.
Facts:
- 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.
- 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.
- 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.
Facts:
- 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.")
- 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.
Summary
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.
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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. |