LTC Bullet: Maine LTC Financing
Study: Preliminary Findings and Queries
Friday, October 12, 2012
LTC Comment: Facing a budget crisis,
MaineCare’s generous long-term care benefit eligibility policies—which
state workers said allow “millionaires on Medicaid”—are locked in by the
federal “maintenance of effort” rule, leaving the state no options but to
cut benefits, providers or education. Details follow.
*** SAD NEWS: “Industry
Mourns the Loss Joyce Ruddock, A Pioneer for Long-Term Care Insurance,
Life & Health Advisor: "Joyce Marie Ruddock, 58, of Newtown CT,
passed away at home in the arms of her husband surrounded by family on
Monday October 8th. . . . Joyce, a nationally recognized leader in the
Medicare and long-term care insurance fields, was the President and Chief
Operating Officer of LifePlans Inc." We send our condolences to Joyce’s
family and colleagues. ***
LTC BULLET: MAINE LTC FINANCING
STUDY: PRELIMINARY FINDINGS AND QUERIES
LTC Comment: The
Maine Health Care Association retained the
Center for Long-Term Care Reform to conduct a study of MaineCare (i.e.,
Maine’s Medicaid program) and long-term care financing in the state.
During the week of October 1-5, 2012, Steve Moses interviewed state
officials including eligibility workers and supervisors, long-term care
providers, senior advocates, long-term care insurance agents and reverse
mortgage lenders in Augusta and Portland, Maine. Following are our
preliminary findings and some follow up queries.
MaineCare and Long-Term Care
Financing Study: Preliminary Findings
- MaineCare is in dire financial
straits with long-term care expenditures contributing disproportionately
to the problem. The state’s general fund is at a “tipping point.”
- Unless ways can be found to
control MaineCare expenses, cost overages will be taken from other
state priorities, especially education.
- Query: What are MaineCare
expenditures for nursing facilities and assisted living facilities
(the Private Non-Medical Facilities or PNMI program) for the past
- Query: What is the current
budget shortfall for 2012?
- Query: What is the current
budget breakout between Medicaid, education, and other state
- MaineCare had generous financial
eligibility rules before the American Recovery and Reinvestment Act of
2009 (ARRA ’09) granted substantial FMAP (Federal Medical Assistance
Percentage) bonuses to all states ($600 million over three years to
Maine) conditional upon “maintenance of effort,” i.e., the
state’s not tightening eligibility rules.
- MaineCare is currently locked
into retaining some of the most generous Medicaid LTC financial
eligibility rules in the United States because of the extension of the
“maintenance of effort” rule by the Patient Protection and Affordable
Care Act of 2010 (PPACA, AKA health reform or “ObamaCare”), but
without the enhanced FMAP that the ARRA ’09 provided and with flat or
falling state revenue.
- Maine faces a strong political
headwind in opposition to tighter MaineCare financial eligibility
rules (“I worked my whole life; I’m entitled to pass my estate to my
heirs”) despite widespread agreement that Medicaid should provide for
people in need and not be free “inheritance insurance” for the middle
- Query: What additional or
better services could MaineCare provide to the most needy Mainers if
the program did not offer such generous benefits to more affluent
citizens? For example, cover the MR/DD (Mentally Retarded and
Developmentally Disabled) wait list? Provide more adequate
reimbursement to LTC providers to attract best caregivers?
- MaineCare LTC financial eligibility
rules are far more generous than required by federal law. For example:
- Maine allows the full federal
maximum spousal impoverishment “Community Spouse Resource Allowance” (CSRA)
of $113,640 as its minimum instead of the allowable federal rule of
half the joint assets not to exceed $113,640.
- Query: How much would
MaineCare save by adopting the more common, less generous federal
- Maine is one of only 13 states
and DC which allow the full federal maximum home equity exemption of
$786,000 instead of the federal minimum of $525,000.
- Query: How much would
MaineCare save by adopting the more common lower home equity
- Query: How much would
MaineCare save if federal law did not require exemption of a home
based on subjective “intent to return” but rather only when return
to the home is deemed medically possible?
- Maine allows new LTC applicants
to annuitize hundreds of thousands of dollars (averaging $127,119 per
case and totaling $5.8 million on 46 cases in 2011; $3.5 million on 25
cases so far in 2012) of a couple’s joint assets in the community
spouse’s name with a full payout of the total amount back to the
community spouse within the actuarial life expectancy of the
institutionalized spouse, sometimes within less than one year. The
Deficit Reduction Act of 2005 (DRA ’05) as interpreted by the Centers
for Medicare and Medicaid Services requires states to enforce this
- Query: How much would
MaineCare save if federal law and regulation allowed the state to
prohibit this use of annuities to shelter assets from Medicaid spend
down rules as recommended by the National Association of State
- The DRA ’05 attempted to close
the “half-a-loaf” loophole whereby affluent recipients could give away
half their assets and wait out their penalty period relying on the
other half of assets, thus reducing the intended penalty period by
half and sheltering half their assets. But a new “reverse
half-a-loaf” strategy is now employed by applicants and their advisers
whereby annuities or promissory notes are used to “cure” half a
penalty thus achieving the same effect.
- Query: How much would
MaineCare save if the state could prohibit the use of the “reverse
- Maine applies a transfer of
assets penalty for certain community services provided with state-only
funds (room and board), but not for such community services covered by
federal matching funds.
- Query: How much would
MaineCare save if federal regulations allowed states to deny or
delay benefits to all people who transfer resources to become
eligible for Medicaid, not just for institutional level of care
- Medicaid planning is widely
available to middle class and affluent families in Maine.
- Medicaid planning is the practice
of manipulating income and assets to qualify a person who would
otherwise be ineligible for Medicaid long-term care benefits due to
excess income and/or assets.
- Examples of internet ads for
Medicaid planning and planners:
- “[T]he attorneys at the Maine
Center for Elder Law, LLC often assist seniors in implementing plans
that can go a long way toward protecting assets in case of future
need for assisted living or nursing home care. Done early enough and
if there are honest, reliable family members or others involved,
such ‘pre-planning’ can save a large fraction of the seniors'
assets.” (Extracted September 13, 2012 from
- “Skelton Law
Offices represents individuals before the Department of Health and
Human Services. The firm prepares and files applications on behalf
of applicants. In the event that an application is denied, Skelton
Law Offices represents clients on appeals of those denials.” “When
we talk about ‘asset protection planning’ at Skelton Law Offices, we
are referring to the strategies and tools that can help you protect
your money and your property from the high cost of long term care.”
(Extracted September 14, 2012 from
the MaineCare laws, there are legal ways to make ‘countable’ assets
uncountable. There are ways to protect part or all of the home and
other assets. The options depend on a number of factors that need
to be explored and discussed with each person.” Extracted
September 14, 2012 from
“Make sure the burial
plan you purchase includes everything that may be needed. The more
you prepay with money that will otherwise need to go to nursing home
care, the less your loved ones will need to provide at the end.
Consider purchasing or setting aside funds for: funeral
arrangements, casket, grave liners, opening & closing of graves,
flowers, gratuities, limousines, police escort, obituaries, hair
styling, makeup, clothing, burial plots, crypts, headstones,
including placement and engraving, and expenses of the
wake.” (Extracted on September 20, 2012 from
planning classes are also readily available. Examples:
- Senior advocates in Maine affirm
the position that MaineCare should be used for those most in need and
not to protect inheritances
- State LTC Ombudsman Brenda Galant
said she agrees “philosophically and politically” with the position
that scarce Medicaid resources should go to the neediest people.
- Representatives of Maine Equal
Justice Partners said there should be “more incentives for LTC
insurance and reverse mortgages” to pay for long-term care. There is
a “whole industry of lawyers” helping people preserve assets while
qualifying for MaineCare. “When people come to us wanting to do that,
we say we don’t do it and they should go to the private bar. They put
assets into apartment buildings (income producing property). Five
years out, there’s no problem giving all away. People do plan, but
our clientele doesn’t have assets to plan. Our big concern is that
low income folks don’t get impacted by policy changes.”
- MaineCare long-term care financial
eligibility workers have heavy caseloads, complicated rules to enforce,
and high turnover. They complain they’re frustrated by rules that place
“millionaires on Medicaid.”
- Average caseloads in the Augusta
and Portland office approach 500 per worker. Applications must be
processed within 45 days. Most workers have less than two years in
their jobs which they agree take two or three years to learn.
Training is non-existent. Turnover is high. Quotes from workers:
- “We don’t feel like we’re
- “We don’t have enough staff and
we have an exploding elder population and increasing need for LTC
- “Budgets are decreasing.”
- “It’s awfully funny that money
is put into training for MaineCare, TANF, etc. while LTC is so
expensive but we don’t have any training and we wouldn’t have time
for it anyway.”
- Most MaineCare LTC applications
come in by mail or fax. Face-to-face interviews are rare though the
most reliable way to validate applicants’ claims.
- Applications completed by
attorneys are “35% of our cases, but 50% of our work” in Augusta; 20
to 25 percent in Portland.
- Quotes from workers:
- “I get these huge applications
from attorneys. Kind of a running joke. They send in stacks of
stuff a little at a time.”
- “The norm we see is $10,000 to
$15,000 per case for attorney’s fees to become eligible.”
- “We wonder ‘who is their
client?’ The infirm elder or the ‘greedy heirs.’”
- “The wealthy think they’re
entitled; the poor on the other hand are so appreciative.”
- Welfare immigration:
- “Quite a few people return home
to Maine because of the generosity of our eligibility rules. Why be
limited to $2,000 [in exempt assets] when you can hope to get your
clutches on $10K?”
- “People live in New Hampshire
but bring family members to a York county nursing home.”
- “We have one of the most
available assisted living facility programs in the country. A woman
applied for her mother in Connecticut where [Medicaid doesn’t cover]
boarding homes, so then she applied here in Maine because she has
have relatives here.”
- Both attorneys and family members
representing applicants call eligibility workers directly by phone
with questions and occupy many hours of the workers’ time. “We tell
people to consult an attorney after a half hour on the phone.”
- No routine property verifications
are conducted with banks, county recorders or assessor’s offices.
Applicant statements are accepted at face value unless suspicious.
- Eligibility workers stated that
over half of all MaineCare LTC applicants own homes and 90 percent of
these “intend to return” to the home rendering the home exempt whether
or not it is occupied and whether or not there is any medical
possibility the institutionalized recipient will ever be able to
- The workers estimate that
approximately 40 percent of their MaineCare LTC cases used some form
of asset divestment or shelter to qualify for assistance.
- According to the workers, 80
percent to 90 percent of all LTC cases have sheltered assets in
prepaid burial plans averaging $7,000 to $8,000 per recipient. “We
tell people all the time if they buy a prepaid burial, they will
qualify next month.”
- MaineCare applies no limit on
household goods and furnishings. Workers said: “There is no limit.
We don’t even ask. There could be antique furniture [or other
- Annuities: Hundreds of thousands
of dollars are transferred to the community spouse who creates an
annuity and gets it all back within the actuarial life expectancy of
the institutionalized spouse, sometimes in less than a year with
monthly incomes from the annuities of thousands of dollars. Fifteen
percent of their cases.
- Annuities example: “Every other
case, maybe 2/3 of the cases from attorneys involve annuities. I
recently had a case with an 83- and 84-year-old couple, who, by advice
from their attorney, purchased an annuity for $450,000 with a monthly
pay out of $17,000 to make the wife eligible for MaineCare and provide
income for the community spouse. We never look at their assets after
they’re eligible. Once annuities are created, they get all the money
back. One of the requirements is that the state gets any remainder.
I’ve only had one client die where the state got any money back.
Aggravating when you see this. They’re obviously over the spousal
- Five or 10 percent of cases
involve “inaccessible assets,” i.e., property own jointly with
someone else who refuses to sell his or her share. We “ask for
something in writing, then approve.”
- Half-a-loaf: “You apply; we do a
look back and create a penalty; then you transfer half the money back
and we have to forgive the remaining penalty. We hate it, they do
it. A regular person who can’t afford an attorney does not know there
is this way out. Creates more work for us.”
- Goold abuse: Workers in the
Augusta and Portland offices stated that hospitals and nursing homes
will advise people who can’t possibly qualify for Medicaid, because of
high income and/or assets, to apply nevertheless so that the cost of
the Goold medical assessment, which is required prior to
institutionalization, is diverted to the Medicaid program which covers
the cost whether or not the applicant is ultimately deemed eligible
- Intent to return: “We accept
‘intent to return’ signed by POAs (Powers of Attorney) [to exempt a
home] in cases where the owner is not even competent to intend to
return home. It’s bogus.”
- Medicaid Eligibility Quality
Control (MEQC) reviews samples of Medicaid cases but reportedly does
not review LTC cases.
- Query: How much does MaineCare
pay for recipients who could, should, and would have paid for their
own care in the absence of overly generous eligibility rules and due
to inadequate numbers of insufficiently trained and over-worked
- Query: Could MEQC review a
valid random sample of LTC cases to estimate the cost of ineligible
cases across the caseload? If not, could a private contractor
conduct such a review on contingency, i.e., in exchange for a
percentage of funds recovered from ineligible cases?
- MaineCare recovers benefits paid to
recipients over the age of 55 after their deaths out of their estates as
required by federal law (Omnibus Budget Reconciliation Act of 1993 or
- MaineCare recovered an average of
$6.7 million dollars per year for State Fiscal Years (SFY) 2009-12 at
a cost of $273,000 per year for four staff positions and overhead,
which is an excellent cost to recovery ratio of 24.5 to one.
- MaineCare estate recovery exempts
the first $7,000 of each estate from recovery.
- Maine’s program does not use
“TEFRA” liens. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA
’82) authorized states to place liens on real property of
institutionalized Medicaid recipients with no surviving exempt
dependent relatives as a way to ensure the property remains available
for recovery from the recipient’s estate after death.
- Federal law allows recovery from
spouses of predeceased Medicaid recipients but only after the death,
and from the estate of, the surviving spouses. Maine’s estate
recovery program does not pursue “spousal recoveries.”
- As of the latest available
comparable data (2004), Maine recovered from estates at a rate of 2.5
percent of total Medicaid nursing home expenditures, which is very
good as compared to the average for all states of .8 percent. Oregon,
however, recovered at a rate of 5.8 percent, approximately $7.6
million per year more.
- Query: How much more could
Maine recover from the estates of deceased recipients and their
spouses if the state hired more estate recovery staff, eliminated
the $7,000 exemption, implemented TEFRA liens, recovered from
spouses’ estates and implemented additional “best practices”
perfected in other states, especially Oregon?
- MaineCare’s LTC providers face
- Maine’s nursing home patient
acuity is among the highest in the United States. Residents
with dementia are 55 percent, the most of any state. Those with low
care needs are only two percent, the 49th lowest in the
- 73 percent of nursing home
residents and 80 percent of assisted living residents are on MaineCare.
- Yet, MaineCare pays nursing homes
$189 per day, or only 69 percent of the private pay rate, which is
$275 per day.
- The MaineCare rate for assisted
living (PNMI) is about half of the private rate: a little less than
$100 compared to $200 for private payers.
- Such low rates force caps on
available Medicaid beds.
- According to a study conducted on
behalf of the American Health Care Association, MaineCare reimburses
nursing facilities $21.21 per bed day less than allowable costs.
- “For every dollar of allowable
cost incurred in providing long term care for a Medicaid patient in
2011, the Medicaid program reimbursed approximately 90 cents on
average. Unprecedented state budget deficits and the expiration of
federal stimulus funds on July 1, 2011 contributed to the second
lowest percentage of cost coverage in the ten years that this annual
report has been compiled.” (Eljay report)
- One provider said “We probably
lose $250,000 to $350,000 per year covering 50 Medicaid residents.
Our ten residents on Medicare balance the Medicaid losses, but we’re
still trying to rebound from the Medicare rate reduction last
October.” Further Medicare cuts are anticipated and Medicare
occupancy is declining as well, now down to only 10 percent.
- Inadequate reimbursement
“undervalues the people who work in long-term care by forcing salaries
and benefits down to the minimum to balance.”
- Guardians or patient
representatives with power of attorney sometimes keep recipient’s
Social Security income instead of turning it over to offset Medicaid’s
cost of care. Facilities are burdened with collecting these funds but
“safe discharge” rules prevent their terminating services for lack of
payment. Providers estimated this is a $500,000 problem statewide
- Some facilities have closed
already due to high MaineCare occupancy and low reimbursements.
Others have cut back on the number of available Medicaid slots. And
more are likely to follow suit in the absence of more adequate
MaineCare reimbursement rates in the future.
- Private financing alternatives that
could relieve financial pressure on MaineCare’s long-term care program
- Asset spend down is very limited
due to . . .
- MaineCare’s generous LTC
financial eligibility policies resulting in relatively easy access
to benefits with limited spend down.
- The difficulty of enforcing
current rules because of the limited number, inadequate training and
high turnover of eligibility workers.
- The ready availability of
Medicaid planning advice on methods of artificial
- Enhanced estate recovery:
limited potential as discussed above
- Estate recovery staff estimated
that the potential for increased recoveries is $1.5 to $2.0 million
- Even higher recoveries might be
achieved by systematically researching and implementing best
practices in other states.
- Long-term care insurance
- Growth of the LTC insurance
market is moderate, flat or declining depending on whom you ask.
71,156 LTC policies are “in force.”
- Ten carriers market the product
in Maine, but only six actively. Very few agents specialize in LTC
- Retirees have been priced out
of the market leaving worksite sales the most promising.
- Problems include “press, price
and perception.” Yet “good coverage is available for $20 to $40 per
- Hybrid products, combining LTC
coverage with life insurance or annuities, are becoming more popular
as growth of traditional, individual policies levels out.
- Maine’s LTC Partnership
Program, which provides Medicaid spend down forgiveness equal to the
qualified LTC insurance protection purchased and used, has helped
but only marginally in the absence of strong education and promotion
by the state.
- Maine has a 100 percent state
tax deduction for qualified LTC insurance premiums.
- Bureau of Insurance regulation
of LTC insurance in Maine is attentive and fair according to
discussions with BOI staff and agents.
- Maine publishes consumer guides
to long-term care insurance and has a very generous policy allowing
exchange of non-Partnership for Partnership LTC insurance policies.
- Nevertheless, easy access to
MaineCare benefits after the insurable event occurs has reduced
demand for private LTC insurance. One agent said “attorneys call to
say they need a Medicaid annuity.”
- Reverse mortgages
- These financial products enable
people 62 years or older to tap equity in their homes in the form of
lump sum payments, monthly payments or, most commonly, as a line of
credit to be used as needed.
- Like LTC insurance, reverse
mortgages have faced challenges of “press, price and perception.”
- New “Saver Reverse Mortgages”
are popular having reduced closing costs by allowing less equity to
- Formerly used mostly by people
in desperate financial crises, more people today use reverse
mortgages to supplement and complement their overall financial
- Reverse mortgages are sometimes
used to fund home care but almost never to purchase LTC insurance or
to finance care for an institutionalized spouse.
- MaineCare’s $786,000 home
equity exemption probably discourages the use of reverse mortgages
to fund long-term care.