LTC Bullet:  Moses Replies to Congressman's Questions
(LTC Embed Report #11)

Thursday, October 13, 2011

Washington, DC--

LTC Comment:  House Oversight and Government Reform Healthcare Subcommittee ranking member Danny Davis (D, IL) asked me some questions in writing after the 9/21 hearing on "Examining Abuses of Medicaid Eligibility Rules."  His questions and my answers follow.


LTC Comment:  First, let me thank all you faithful Center members and supporters for your many complimentary messages about the September 21 hearing "Examining Abuses of Medicaid Eligibility Rules." 

If you haven't watched the 90-minute hearing online yet, check it out here:  You'll get an earful and an eyeful of how Medicaid long-term care eligibility really works.  Much of it isn't pretty.

You can read each of the witnesses opening remarks, including mine, here.  I was originally told that a full transcript of the hearing would be posted after two weeks.  Latest information is that a transcript will not be available to the public until six months after the hearing. 

In the meantime, I received five questions from the subcommittee's ranking member.  You may find his questions and my answers of interest.


Reply to Ranking Member Davis's questions sent on Center for Long-Term Care Reform electronic letterhead stationery:

Question #1:  "Mr. Moses, you make allegations of widespread asset transfers among older people in order to fraudulently receive Medicaid assistance for nursing home services. Research by the Urban Institute shows that even the most aggressive approach to recovering transferred assets would yield a savings of only about 1 percent of total Medicaid expenditures for long-term services and supports. Similarly, a Government Accountability (GAO) report on this issue found that the median amount of money transferred was $3000, with older persons with low incomes and disabilities transferring less than those who were less likely to go on Medicaid. Another GAO report found a median amount of $15,152 in transferred for less than fair market value.  Do you have any hard evidence apart from anecdotes to refute these findings? Can you document with hard numbers the actual amounts being transferred fraudulently?"

Reply #1:  I did not in my testimony, nor have I ever in any of my published writings or otherwise, made "allegations of widespread asset transfers by older people in order to fraudulently receive Medicaid assistance for nursing home services."  The premise of your question is false.

If you read my testimony, or anything else I've published, you will see that the problem is not fraud, but rather the ease with which middle class and affluent people qualify legally for Medicaid LTC benefits under the basic eligibility rules.  Nothing in the sources you cite contradicts my evidence or argument in any way.

Question #2: Mr. Moses, your testimony is premised at least in part on the argument that Medicaid costs have risen to a large extent by increased numbers of older people going on Medicaid to pay for nursing home costs. Are you aware of CMS data showing that the number of older people receiving Medicaid assistance to pay for nursing home costs actually decreased by 23 percent between 1995 and 2008 - even while the older population was increasing by 16 percent? Are you aware that the percentage of older people using Medicaid to pay for nursing home care decreased from 4.6 percent in 1975 to 2.8 percent in 2008? Are these numbers consistent with the allegation that increasing numbers of older people are cheating or trying to game the system to get on Medicaid?

Reply #2:  My testimony was not premised in any way on "the argument that Medicaid costs have risen to a large extent by increased numbers of older people going on Medicaid to pay for nursing home costs."  The premise of your question is false. 

Excessive dependency on nursing homes, or "institutional bias," was caused by Medicaid's paying mostly for nursing home care since 1965.  That's why a healthy, private market for home and community-based services (HCBS) never developed.  As Medicaid "rebalances" from institutional care to HCBS, the danger is that government services will become even more attractive and expensive at a time when government funding is less and less available.  By controlling eligibility in ways I've recommended, Medicaid can cover a full range of home and community-based services for a smaller number of genuinely needy recipients and, at the same time, encourage middle class and affluent people to plan early, save, invest or insure for long-term care, and pay privately for their care, thus relieving Medicaid and tax payers of a huge financial burden and encouraging private sector jobs and new tax revenue.

Question #3: Mr. Moses, you have suggested requiring older people to take out a reverse mortgage, a loan from a private lender, and exhausting the person's home equity before becoming eligible for Medicaid long-term services and supports (LTSS). As you may know, the upfront costs on such loans can be in excess of $10,000 before the person gets a dime in loans. Do you think it is proper for Congress to require people to take out such expensive private loans as a condition of eligibility for public benefits?

Reply #3:  It is not necessary to require people to take out a reverse mortgage.  There are many ways for consumers to extract the equity from their homes to pay for long-term care.  The key point I'm making is that Medicaid should not exempt up to three quarters of a million dollars worth of home equity while paying for the home owner's long-term care services.  Doing so has turned Medicaid into free inheritance insurance for boomer heirs and impeded the program's true purpose, to be a quality long-term care safety net for people in need.  In my paper titled "Save Medicaid LTC $30 Billion Per Year AND Improve the Program," I've explained my position on this issue in detail:$30_Billion_Per_Year_AND_Improve_the_Program.pdf.

Question #4:  Mr. Moses, you cite a study by the National Council on Aging as a basis for arguing that $30 billion a year in Medicaid savings could be realized by requiring those dually eligible for Medicare and Medicaid to take out reverse mortgages before gaining eligibility. But that report indicates that only about 17 percent of older Medicaid beneficiaries could be candidates for using a reverse mortgage to pay for LTSS, even using a very broad definition of being a candidate. Only about 60 percent of duals are age 65+, so only roughly 10 percent of duals would even be eligible for a reverse mortgage - and many of them have homes with low values. How could tapping these meager resources generate $30 billion a year?

Reply #4:  I do not cite the NCOA study as a basis for "requiring those dually eligible for Medicare and Medicaid to take out reverse mortgages before gaining eligibility."  The premise of your question is false. 

The point, as I clearly articulate in the paper you cite, is that if Medicaid did not exempt up to $750,000 of home equity, affluent people with homes of great value, would take the risk and cost of long-term care more seriously and plan more responsibly to pay for their own care and protect their real estate wealth.  The goal is to prevent people from ending up as dual eligibles because they failed to save, invest or insure for long-term care and, as a consequence, turn to Medicaid by default after they require care.

Question #5:  If an individual was single and was receiving Medicaid nursing home care, wouldn't that individual be more likely to sell his or her home, rather than take out a reverse mortgage, since the individual would not be living in his or her home?

Reply #5:  Under existing Medicaid eligibility rules, the home remains exempt as long as the Medicaid recipient or his or her representative expresses a subjective intent to return to the home.  It makes no difference whether the recipient is able medically ever to return to the home, is single or married, or whether anyone is residing in the home or not.  In the absence of estate recovery, which has been mandatory since OBRA 1993, but which most states have not implemented strongly and the federal government has not enforced, the value of the home redounds to the heirs and the cost of the care remains with Medicaid and tax payers.

If Medicaid eligibility rules were changed to exempt a smaller amount of home equity, individuals would need to extract the value of the home to pay for long-term care by various means.  Reverse mortgages, either formal ones with a financial institution or informal ones with family members, are one means to put home equity to use to fund LTC.  Sale of the home if no exempt relative remains in it is another option.  The key point here is that home equity becomes a source of private financing for quality home and community-based services, or assisted living or nursing home care relieving Medicaid of the need to pay for such services and recover from estates.


Stephen A. Moses

Stephen A. Moses


LTC Comment:  If any of these questions or my replies pique your interest, you'll find much more in the same vein by watching the hearing here or reading any of the Center's published reports here