LTC Bullet: Connecticut Expands Medicaid LTC Largesse

Wednesday, July 7, 2010


LTC Comment: Unlike most states, Connecticut must be rolling in taxpayers' money to be able to expand Medicaid long-term care in a manner explained after the ***news.*** [omitted]


LTC Comment: As most states confront serious budget shortfalls and worry that Medicaid will not extend generous "stimulus" bonuses into next year, one state seems oblivious. Connecticut has changed its "Community Spouse Resource Allowance" to permit a higher protected asset amount. The state has also circumvented rules in the Deficit Reduction Act of 2005 that placed a limit on the amount of home equity a Medicaid recipient could exempt while receiving LTC benefits.


Here's the story as published by the Connecticut Care Planning Council and CT-NAELA, the Connecticut chapter of the National Academy of Elder Law Attorneys:

"Connecticut Care Planning Council The Connecticut chapter of the National Academy of Elder Law Attorneys ('CT NAELA') is proud to announce that Public Act 10-73, An Act Concerning Medicaid Long-Term Care Coverage For Married Couples, was signed into law by Governor Rell on May 27, 2010. CT NAELA drafted the new law and was its main proponent.

"The new law allows the well spouse of an individual needing long term care in a nursing home or at home to keep the home residence, a car and all of the couple's assets, up to $109,560.00 in 2010; the ill spouse is immediately eligible for Medicaid/Title 19. Under the old law, if one spouse was in the nursing home or needed home and community based long term care services, the well spouse still living at home could keep the home, a car, but only one-half of the couple's other assets, or $109,560.00 in 2010, whichever was less. The remaining one-half of the couple's assets had to be spent-down in order for the ill spouse to be eligible for Medicaid. For example, if a couple had $80,000.00 in assets in addition to their home and car, under the old law, the well spouse could only keep one-half of the $80,000.00, or $40,000.00, and the remaining $40,000.00 had to be spent-down before the ill spouse would be eligible for Medicaid. Under the new law, the well spouse can keep the house, car and all of the couple's assets, up to $109,560.00 in 2010, and not have to spend-down anything, and the ill spouse will be immediately eligible for Medicaid/Title 19.

"The second part of the bill allows an individual or a couple to take out a reverse mortgage loan, home equity loan or other loan financing, deposit those loan proceeds into a separate account and not have the loan proceeds counted as assets or income for an individual applying for home or community based long term care services under a Medicaid waiver. Under the old law, the proceeds of a reverse mortgage or home equity loan were counted as assets and income and made individual ineligible to receive long term home care services at home. The new law allows an individual to keep loan proceeds in a separate account and remain eligible to receive long-term home care services."


LTC Comment: Following is our analysis:

The CSRA: Under federal law (Medicare Catastrophic Coverage Act of 1988 or MCCA '88), state Medicaid programs must allow the community spouse of an institutionalized Medicaid recipient to retain half the couple's joint assets not to exceed $109,560. (That protected amount was only $60,000 in the original MCCA '88 legislation to end "spousal impoverishment," but it increases annually with inflation.) At their option, states could instead protect the first $109,560 of a couple's assets regardless of their total wealth, thus making the federal maximum also the state's minimum Community Spouse Resource Allowance. Connecticut has recently changed from the more restrictive to the more generous rule.

Here's why that matters. When Connecticut allowed only half the joint assets to be protected up to a limit of $109,560, a couple with $120,000 could retain only $60,000 for the community spouse. The institutionalized spouse's half, or all but a few thousand dollars of it that remained exempt regardless, had to be spent down. (Of course, there are many ways to avoid that spend down requirement, but such was the theory anyway.) Now that Connecticut allows the first $109,500 to be protected, the same couple can retain all but $10,500 (i.e., $120,000 total assets minus $109,500 protected for the spouse.) Thus, the couple applying for Medicaid saves nearly $50,000. Or conversely, assuming that $50,000 would otherwise have been spent to delay Medicaid eligibility (doubtful, of course), the state is on the hook for a few extra months of Medicaid long-term care costs.

The reverse mortgage angle. Far more devastating to Connecticut taxpayers is the new provision regarding home equity. Until the DRA '05 capped Medicaid's home equity exemption at $500,000 or $750,000 (CT is one of only a few states to adopt the $750K maximum), there was no limit on how much money Medicaid recipients could shelter in a home including all contiguous property. The idea behind the DRA's cap was to encourage people with substantial home equity to fund their own long-term care instead of relying on public welfare.

To get around the DRA cap, Connecticut has evidently allowed people to take out a reverse mortgage or other home equity loan in order to reduce their home equity to below three quarters of a million dollars and to put the excess assets into a separate exempt account. Our source in Connecticut tells us that (1) Governor Rell opposed this change but did not veto it when CT-NAELA pushed it through the state legislature, (2) state Medicaid officials believe that federal CMS (Centers for Medicare and Medicaid Services) officials will allow this change (hard to believe, but who knows with the current Administration?) and (3) the sheltered assets will be recoverable from the estate. Nevertheless, this rule change could cost Connecticut and federal taxpayers millions.

Here are just a few of the problems with Connecticut's dodge of the home equity cap:

  • Even wealthier people than before can qualify for Medicaid LTC in Connecticut by sheltering the wealth in a home, removing equity to reach the $750,000 limit, and hiding the rest in the newly allowed special account. (Think the affluent don't use Medicaid? Think again: Medicaid planners use "key" money to get their wealthy clients access to the best care Medicaid offers which is not readily available to the poor.)
  • Connecticut taxpayers are not alone paying for this generosity because federal taxpayers supply more than half of all Medicaid funds in the "Constitution State."
  • Estate recovery of assets sheltered in the new home equity protection accounts is highly unlikely. Few states recover from spouses' estates and those that do recover little as many years may transpire between the death of the Medicaid recipient and the death of the surviving spouse or other exempt, dependent relative.
  • With unlimited assets protected from Medicaid spend down, the incentive has been reduced for Connecticut citizens to plan responsibly for future long-term care expenses by saving, investing or insuring so they'll be able to pay private.
  • With more people dependent on Medicaid in Connecticut, long-term care providers will have an even more difficult time giving quality care at the most appropriate level because of Medicaid's notoriously low reimbursement rates ($18.23 per bed day less than the cost of providing the care in nursing homes estimated for 2009).
  • The poor will have even less access to Medicaid LTC benefits as a result of scarce welfare resources being siphoned away to benefit CT-NAELA Medicaid planners and their affluent clients.

It boggles the mind how suicidally gullible and irresponsible public officials can be when responding to the self-interested pleadings of the Medicaid planning bar. Maybe Connecticut voters deserve what they get from the politicians they put into office. But surely this galls federal taxpayers, who are even more out of pocket.

(Special thanks to major-center-supporter Claude Thau for tipping us to this news and to David J. Guttchen, Project Director, Connecticut Partnership for Long-Term Care for helpful background.)