LTC Bullet: LTC Graduate Seminar Updated
Friday, November 30, 2012
LTC Comment: Steve Moses delivered the Center’s LTC Graduate Seminar to the Baltimore Estate Planning Council and the Maryland Health Underwriters Association this week. Read the program’s transcript update after the ***news.***
*** KEY NUMBERS UPDATED: The Centers for Medicare and Medicaid Services (CMS) has updated the critical Medicare and Medicaid numbers for 2013. For example, the home equity exemption for Medicaid increases from a minimum of $536,000 ($525,000 in 2012) to a maximum of $802,000 ($786,000 in 2012). For all the new numbers, see our updated chart here. It shows the year-by-year increases as adjusted annually for inflation going back two decades. You’ll need your Center Member’s-Only User Name and Password. Need a reminder? Or want to join the Center, receive our weekly publications and get access to The Zone? Contact Damon at 206-283-7036 or email@example.com. ***
*** LTC CONFERENCE: Registration is now open for the Thirteenth Annual Intercompany Long Term Care Insurance Conference to be held March 3-6, 2013 at the Hilton Anatole in Dallas, Texas. Once again, the ILTCI conference will host and subsidize the cost for a special 2-day pre-conference CLTC Master Class (only $95 extra). Harley Gordon will personally conduct this class. If you are an agent selling LTC (or other) insurance directly to consumers, you can apply here for a Scholarship that will qualify you for a $295 Scholarship rate (plus an additional $95 if attending the CLTC class). If you are a government employee, register here for the conference using the Government Employee rate of $95. For those who have never attended ANY of the previous twelve annual conferences, get a special rate of only $395 (instead of the $895 early bird rate) and register here before January 10th. The price of registration goes up $100 after that date. Make your Hotel reservations early for attractive rates of only $129 (for the Hilton Anatole Hotel). Get all details at http://www.iltciconf.org/. If you have any questions, contact Jim Glickman at 818-867-2223. ***
*** MEDICAIDPLANNING.ORG: Every other week or so someone asks me if I’ve seen the egregious Medicaid planning promotions of one Roccy DeFrancesco at www.medicaidplanning.org. Yes. I have. And indeed, he is outrageous. Check it out here and watch his 22-minute video. Then let the purveyor of this advice know why self-impoverishment to qualify for public welfare financing of long-term care isn’t such a great idea. If you contact him, be professional and respectful, but firm. And by all means, forward a link to his website to your local health care media (print, broadcast and cable) explaining to the reporters how much damage Medicaid planning does to consumers and taxpayers. ***
LTC BULLET: LTC GRADUATE SEMINAR TRANSCRIPT UPDATED
LTC Comment: During the Center for Long-Term Care Reform’s 2008 Long-Term Care Consciousness Tour, Steve Moses delivered our LTC Graduate Seminar dozens of times to audiences all across the United States. The program received such positive reviews that we made a transcript of it available on the Center’s website here.
There’s been a lot of change and development in long-term care financing policy in the meantime, so we’ve updated the transcript. The new material follows below, more or less as presented in Baltimore, Maryland during the past few days. You can still find the whole transcript including the update here: http://www.centerltc.com/members/LTCGraduateSeminarTranscription112712.pdf.
The LTC Graduate Seminar transcript update added on November 30, 2012 follows.
Long-Term Care Partnership Program
Finally, the DRA ’05 reinvigorated the LTC Partnership Program. LTC Partnerships had been around since 1992. The idea behind them was to incentivize people to purchase LTC insurance by forgiving some of the prospects’ Medicaid spend down liabilities. The offer: buy LTCI, use it, and the Partnership policy holder could go onto Medicaid while retaining assets up to the amount of insurance purchased and used instead of having to spend down to $2,000. Under a Robert Wood Johnson Foundation grant, four states—California, New York, Connecticut and Indiana—piloted the program. A variation, in New York alone, allowed holders of special Partnership policies to retain all their assets and still receive lifetime Medicaid LTC benefits.
As these pilot projects were gearing up in the early 1990s, they were derailed by Henry Waxman, a liberal Congressman from California. Waxman considered Medicaid to be welfare and inappropriate for people with substantial resources to receive. So, when the Omnibus Budget Reconciliation Act of 1993 made recovery from the estates of deceased Medicaid recipients mandatory, Congressman Waxman insisted that assets sheltered by Partnership policies for purposes of initial Medicaid eligibility, should nevertheless, not be exempted from estate recovery. That rule took the steam out of the Partnership movement. A Partnership policy holder could preserve substantial wealth and qualify for Medicaid, but at death that wealth became recoverable by the state to recoup Medicaid funds expended on the policyholder’s behalf.
For over a decade, the Partnership program languished. Then, in the DRA ’05, the OBRA ’93 estate recovery mandate was eliminated as against Partnership policies. They resurged and became available in half or more of the states. LTC insurance sales in the original four pilot states increased on the margin. Similar results are expected in the new Partnership states, especially in those that endorse and promote the policies officially. Nevertheless, two factors impede Partnership sales. First, Medicaid LTC eligibility remains easily available to middle-class and affluent people without significant spend down so that the Partnerships’ spend down forgiveness is less of an incentive than it would otherwise be. Second, Medicaid LTC has such a dismal reputation for problems of access, quality and impending insolvency that consumers who know the program are not likely to want to rely on it. Certainly, Medicaid is unlikely ever to pay for the kind and quality of home care and assisted living that are routinely available through private LTC insurance policies.
[See Stephen A. Moses, "The Long-Term Care Partnership Program: Why It Failed and How to Fix It," in Nelda McCall, editor, Who Will Pay for Long Term Care?: Insights from the Partnership Programs, Health Administration Press, Chicago, Illinois, 2001, pps. 207-222; http://www.centerltc.com/pubs/LTCPartnership.pdf.]
Recent LTC History
America’s post-Internet-boom, early-2000s recession led to passage of the DRA ’05 with its new constraints on Medicaid LTC financial eligibility. As so often happened in the past, however, soon after the new legislation passed, the economy improved, welfare rolls went down, tax receipts improved and public officials at the state and federal levels lost their enthusiasm for enforcing the new restrictions. In California, for example, Medi-Cal (California’s name for Medicaid) didn’t implement mandatory changes required by the DRA ’05 such as the longer lookback period for asset transfers and the cap on home equity. Nor did the federal government enforce the law, allowing California to flout it with impunity and other states to get by with only half-hearted enforcement.
[Source: Stephen A. Moses, Medi-Cal Long-Term Care: Safety Net or Hammock?, Center for Long-Term Care Reform and Pacific Research Institute, January 2011]
Medicaid planners found new ways to circumvent the DRA’s stronger spend-down rules, replacing for example the newly proscribed “half-a-loaf” strategy with a clever “reverse half-a-loaf” gimmick whereby their affluent clients could use promissory notes or annuities to “cure” an asset transfer penalty and achieve the same objective to preserve half the assets. Medicaid-compliant annuities re-emerged in popularity allowing “millionaires” to qualify easily for LTC benefits according to MaineCare (Maine’s name for Medicaid) eligibility workers.
[Source Stephen A. Moses, The Maine Thing About Long-Term Care Is That Federal Rules Preclude a High-Quality, Cost-Effective Safety Net, Center for Long-Term Care Reform and the Maine Health Care Association, November 2012]
Thus, by 2007, easy access to Medicaid LTC benefits was returning to its historical norm. Then the economic cycle clobbered America again. In 2008, the “Great Recession” began. Once more, state and federal tax revenues plummeted, welfare rolls skyrocketed, and huge state and federal budget shortfalls developed. In other words, the stage was set for another round of legislative and administrative initiatives to reduce Medicaid expenditures, tighten eligibility rules, curb Medicaid planning abuses, and protect the LTC safety net for people most in need. But this time, it didn’t happen. Why?
Maintenance of Effort
The American Recovery and Reinvestment Act of 2009 (ARRA ’09) was signed into law by President Obama on February 17, 2009. This “stimulus” law ultimately pumped $831 billion into the economy according to the Congressional Budget Office. State Medicaid programs were among the biggest beneficiaries of the ARRA ‘09’s largesse receiving approximately $100 billion in extra funds from an increase in federal Medicaid matching funds. But this windfall had a string attached. To qualify for the additional revenue, states had to agree not to tighten their Medicaid eligibility rules. This “maintenance of effort” (MOE) requirement prevented states from reducing Medicaid expenditures during the economic downturn by means of targeting scarce resources to the neediest applicants.
The ARRA ‘09’s MOE restriction expired at the end of June 2011, at which time state revenues plunged as federal matching fund rates reverted to pre-stimulus levels. A state that had been getting three dollars in federal matching funds for every dollar it put up now was getting only two federal dollars for every state dollar. Simultaneously, due to the reduced economic activity incidental to the ongoing economic downturn, other state revenues from sales and income taxes declined as well. But Medicaid costs continued to increase rapidly as they always do when the economy falters. This would have been the perfect time to control the Medicaid eligibility hemorrhage by targeting the program’s scarce benefits to citizens who needed them most.
By this time, however, a new MOE rule applied which prohibited any reduction in Medicaid financial eligibility. The Patient Protection and Affordable Care Act of 2010 (PPACA ‘10, AKA health reform or “ObamaCare”) required maintenance of effort upon penalty of the loss of all federal Medicaid funds. Under PPACA ‘10, however, the states received no bonus in federal matching funds for complying with MOE. Thus, with flat or falling state government revenues, state Medicaid programs all across the country were locked into retaining the generous Medicaid LTC financial eligibility they had implemented during better economic times. If they acted to reduce Medicaid LTC eligibility even within limits allowed by federal law before imposition of the MOE requirement, they could lose all federal Medicaid funds.
Then in June 2012 the United States Supreme Court ruled that, although ObamaCare is constitutional, states can nevertheless opt out of its Medicaid expansion provision without losing federal matching funds for the rest of their Medicaid programs. Arguably, states that choose not to expand Medicaid under PPACA should therefore not be constrained by the law’s MOE provision for the same reason. Some legal and policy experts, as well as the state of Maine, have made that case, but so far unsuccessfully based on interpretations from the Centers for Medicare and Medicaid Services (CMS, the federal agency that oversees Medicaid) and the Congressional Research Service.
Thus, faced with widespread budget shortfalls and doubtful new revenues sufficient to close the gaps, states have only two ways to constrain costs: cut benefits or cut providers. With eligibility cuts out of bounds due to MOE, the states’ only options, besides shifting funds from education or some other budget category, are to eliminate desperately needed services or to reduce provider reimbursements. Cutting services hurts the most needy. Provider reimbursements are already minimal and further cuts could lead to facility closures and other LTC provider shortages. At present, the maintenance of effort requirement is the biggest obstacle to Medicaid LTC reform, which is stymied so long as MOE remains in effect.
The Patient Protection and Affordable Care Act of 2010 (PPACA ’10) or “health reform” was signed into law by President Obama on March 23, 2010. By far its most important impact on long-term care financing was its provision regarding maintenance of effort as already explained. But ObamaCare attempted to address LTC financing in two other potentially important ways. One was the “CLASS Act,” an acronym standing for Community Living Assistance Services and Supports. While not formally repealed, CLASS died for all practical purposes when it became clear the pseudo-LTC-insurance program was financially infeasible to implement. I explained the problems and deficiencies of CLASS in a 2011 speech to the Society of Actuaries "Living to 100" Symposium. The aborted program does not warrant further consideration.
The other way ObamaCare addressed long-term care was with several special programs and pilots designed to encourage more public financing of home and community-based services (HCBS). These are described in an October 2011 report by the Kaiser Family Foundation titled “State Options That Expand Access to Medicaid Home and Community-Based Services.” They need not concern us here, because, as the following section explains, publicly financed HCBS on a wide scale are not financially sustainable, impede a private market for home-based care, and discourage responsible long-term care planning.
The LTC Graduate Seminar transcript update ends here. To read the whole transcript, including the section that follows the update, go to “The Long-Term Care Graduate Seminar.”