LTC Bullet:  Minnesota Medicaid Aborts Move to Four ADLs

Friday, January 3, 2014


LTC Comment:  If home care saves Medicaid money, why would Minnesota change from requiring one ADL to four ADLs for recipients to qualify for its home care waiver?  The answer after the ***news.***

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*** ILTCI CONFERENCE.  The 14th annual Intercompany Long-Term Care Insurance Conference will convene March 16-19, 2014 at the Rosen Centre in Orlando, Florida.  Get all the details and register here.  Chris Gardner will keynote the event on opening day.  His life was the basis for the book and movie “The Pursuit of Happyness.”  The conference will close with a general session on “The Future of the Industry,” by Marc Cohen, a nationally known and highly regarded industry analyst.  In between the opening and closing general sessions, you can expect the usual high caliber presentations, peerless networking, and excellent food and drink.  This is a convocation not to be missed if you can manage it.  Damon and I will be there to cover the program and report on it.  Say hello if you attend and, if you don’t (rue the thought), then watch for our “LTC Embed” accounts of the action. ***

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LTC Comment:  Minnesota planned effective January 1, 2014 to jump from requiring one ADL for Medicaid recipients to qualify for home-based LTC benefits to four ADLs.  Read all about it in the Minneapolis Star Tribune here.  This was the plan in a nutshell:

“Starting in January, thousands of low-income elderly Minnesotans could lose government benefits intended to help them stay in their homes and out of nursing care.

“In an effort to constrain runaway Medicaid spending, Minnesota is implementing stricter rules that will make it harder for senior citizens to qualify for home-based services, potentially leaving them with reduced care or no care at all. . . .

“Until now, it has been relatively easy for poor Minnesotans to qualify for the program. It was enough to show that they needed assistance in one basic activity of daily living, such as help with bathing or dressing.

“Under the new criteria, seniors must show that they need assistance in at least four activities of daily living; or, alternatively, they need help in a single critical activity such as toileting or transferring, for example, moving from a bed to a wheelchair.”

This new tougher rule was not implemented.  Minnesota Governor Mark Dayton postponed the change for a year due to “an outcry from advocates for senior citizens and the poor.”  Find details on the delay here.

What’s going on?  First, why would Minnesota Medicaid cut home care services to save money if home care itself is supposed to save money?  Second, why would the Governor delay the change if it makes sense?  The answers are an object lesson in why and how Medicaid distorts the long-term care market.

The answer to the first question is that Minnesota Medicaid would not seek to cut home care services if they really did save money.  They do not.  No empirical evidence shows that home care saves money.  It tends to delay, but not prevent institutionalization, thus causing higher costs overall.  State Medicaid expenditures for all long-term care—home and community-based care and nursing home care combined—continue to rise rapidly everywhere.  Furthermore, the availability of home care makes Medicaid much more attractive than when nursing home care was its only option.  Thus, when home care is offered, the public is less likely to plan privately for long-term care and more likely to rely on Medicaid.  Consequently, LTC expenditures, especially for home-based services, continue to skyrocket.

The answer to the second question is that the senior lobby and groups claiming to represent the poor brought political pressure to bear on the Governor leading to his decision to delay the change from one to four ADLs.  The irony is that seniors and the poor do not benefit from programs to make Medicaid more attractive.  The reason is that loose financial eligibility criteria make it too easy for middle class and affluent people to qualify for Medicaid LTC benefits.  By admitting too many people to Medicaid, the Medicaid program has distorted the market for long-term care resulting in the public’s denial of LTC risk, their failure to save, invest or insure for long-term care, and Medicaid’s burgeoning and insupportable LTC expenditures.  Those consequences do not help, rather they hurt the poor.

To put the issue in broader historical perspective, this is how Medicaid distorted the LTC market.  It made nursing home care free in 1965 which resulted in (1) widespread and unnecessary use of nursing homes for custodial care (Medicaid’s institutional bias), (2) public indifference to LTC risk and cost which prevented successful development of private LTC financing alternatives (LTC insurance and home equity conversion), and (3) impeded growth of a private home care infrastructure and delivery system.  We’re living with the consequences of these market distortions to this day.

What is changing is that state governments can no longer evade the budgetary consequences of providing most long-term care through Medicaid, a defacto entitlement masquerading as a means-tested public assistance program.  The only thing propping up Medicaid’s LTC financing is the federal government’s ability to borrow and spend beyond its means.  At some point, the federal deficit and debt will sow doubt among lenders (domestic and foreign bond holders) who will no longer provide needed funds except at higher interest rates.  Higher interest rates will make servicing the federal debt impossible.  States, which constitutionally cannot run budget deficits indefinitely, will be left holding the bag.

When economic gravity again prevails, the current system will come crashing down.  The lesson in all this is that state Medicaid programs should seek to return the program to what it was intended originally to be—a safety net for the poor.  When middle class people and the affluent really do have to spend down their own resources, including home equity, for long-term care, they will begin to understand why planning for LTC is necessary.  That process has already begun as we’ve successfully curtailed Medicaid abuse over the years by requiring transfer of assets penalties, extending the look back period, mandating estate recoveries, and capping the home equity exemption.  Much remains to be done, but Minnesota’s aborted effort to save money by cutting home care services is evidence the pressure for such changes remains heavy. 

The lesson for individuals and families is that people who want access to quality home care when they need LTC someday had better plan to pay privately.  The Medicaid safety net will no longer catch them, at least not for home care and, in the future, probably not even for nursing home care.