LTC Bullet: Spousal Impoverishment, Then and Now
Friday, January 22, 2021
LTC Comment: The myth that access to Medicaid LTC benefits requires impoverishment is pervasive. A dose of reality concerning spousal impoverishment specifically follows the ***news.***
*** NEW 2021 MEDICAID SPOUSAL IMPOVERISHMENT NUMBERS. We’ve just updated MEDICAID AND MEDICARE KEY NUMBERS UPDATED ANNUALLY in The Zone, the Center’s members-only website. If you need your user name and password to access The Zone or if you’d like to join the Center to gain sustained access, contact Steve Moses at firstname.lastname@example.org. The 2021 spousal impoverishment numbers are included in the following LTC Bullet. ***
*** CLTCR Premium Membership -- Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including: our LTC Bullets and E-Alerts; access to our Members-Only Zone website and Almanac of Long-Term Care; subscription to our Clipping Service; and email/phone access to Steve Moses for 24-hour turnaround queries. Our Premium Membership is designed to give you a competitive advantage in your long-term care profession. Your increased knowledge of the critical issues and challenges we face in the field of long-term care service delivery and financing equals improved professional success for you and better LTC services for your clients and for those who have no choice but to rely on scarce public resources. Premium Membership is $250 per year, paid up front or monthly by automatically recurring credit card payments. Contact Steve at email@example.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month. ***
*** QUINTESSENTIAL QUERY: After a program I gave for LTCI producers recently, an attendee asked:
I never have been able to understand why the state and federal government do not enforce existing rules about qualifying for Medicaid or create new ones that will limit their liability. It is a welfare program designed to help those who need it and not a program for the people who can afford to pay for their own care. We have known for years that the Baby Boomers are a ticking time bomb, yet the government ignores it. Can you explain why they are not interested in making Medicaid a program that can be accessed by the ones who really need it?
In a nutshell, the problem is decades of drift toward collectivism and dependency on government as everyone’s provider/protector implemented through compulsory social insurance. We’re now paying the price for replacing personal responsibility with government promises. I expect the full bill to come due by 2031 when boomers start turning 85, Social Security and Medicare “trust funds” are depleted and the Fed’s and Treasury’s Faustian bargain with Modern Monetary Theory plays out. Then we’ll learn if there is anything left of the individualistic values and principles that made America great in the first place.
For the full explanation, I recommend my two latest studies, a monograph published in January 2020 titled Medicaid and Long-Term Care and How to Fix Long-Term Care Financing from 2017, published with the Foundation for Government Accountability. ***
LTC BULLET: SPOUSAL IMPOVERISHMENT, THEN AND NOW
LTC Comment: Before the Medicare Catastrophic Coverage Act of 1988, which was signed into law by President Ronald Reagan July 1, 1988, access to Medicaid’s generous long-term care benefits did require spousal impoverishment under certain circumstances. While the “catastrophic” law was still under consideration in Congress, I described the problem and how the proposed legislation would address it in the U.S. Department of Health and Human Services Office of Inspector General’s June 1988 report titled “Medicaid Estate Recoveries: National Program Inspection”:
Under current law, spouses of institutionalized Medicaid recipients are sometimes forced into impoverishment by Medicaid eligibility rules. This usually occurs because the husband is institutionalized first. If, as is often the case, most of the family's income such as Social Security and/or a pension is in the husband's name, Medicaid rules provide that all but a small amount must be applied toward his cost of care. The wife who is left in the home, i.e., the community spouse, retains only a pittance. On the other hand, if the wife is institutionalized first, and the income is still in the husband's name, he keeps the money, because the community spouse has no legal obligation to contribute toward the cost of the institutionalized spouse's care.
The catastrophic bill addresses this problem by increasing the amount of income and resources that the community spouse may retain without affecting the Medicaid eligibility of the institutionalized spouse. Because more people would qualify for assistance and less family income would apply toward the cost of institutional care, the fiscal impact of this solution would be to increase Medicaid expenditures. We found that 3-year cost estimates on similar provisions in different bills varied from $410 million (Congressional Budget Office) to $1,275 million (HCFA actuaries) depending on implementation assumptions. All estimates ascend steeply into future years. (pps. iii-iv, emphasis added.)
Boy did we get that right! Medicaid’s long-term care expenditures have skyrocketed ever since, from $18.5 billion for nursing home and home health care in 1990 to $87.1 billion in 2019, nearly quintupling in the ensuing 29 years.
What MCCA ’88 Did
MCCA ’88 dealt with the spousal impoverishment problem in several ways. It guaranteed the community spouse a “Maximum Monthly Maintenance Needs Allowance” or MMMNA of up to $1,500 per month. The law granted a “Community Spouse Resource Allowance” or CSRA of $60,000.
What these provisions meant is that the wife or husband of an institutionalized Medicaid recipient could retain up to $1,500 per month of the Medicaid spouse’s income instead of that income having to be used to offset Medicaid’s cost of his or her care in the nursing home. Likewise, the community spouse could retain half of the couple’s joint assets not to exceed $60,000, thus exempting those funds from private LTC liability and increasing Medicaid’s expenditures.
MCCA ’88 provided for these spousal impoverishment protections to increase with inflation annually. As of 2021, the original numbers have more than doubled. The MMMNA is now $3,259.50 per month and the CSRA is $130,380. A little over $3,200 per month is not easy living, but it is also most assuredly not “spousal impoverishment.” The official poverty level for single individuals as of 2021 is $12,760 per year or $1,063 per month, a little less than one-third of the MMMNA. Medicaid’s LTC role is to provide a safety net for the poor, not to protect a middle-class life style for people who fail to plan, save, invest or insure for long-term care. So the term “spousal impoverishment” should be stricken from the LTC financing lexicon.
Updated Medicaid Spousal Impoverishment Numbers
In case you’re interested, we’ve updated and published the Medicaid spousal impoverishment numbers every year since 1991, when the MMMNA was $1,662 and the CSRA was $66,480. Those data are available to Center members in The Zone here. You’ll need your user name and password for access to The Zone. Get a reminder from firstname.lastname@example.org if you’re already a Member or contact him to join and get access to this valuable resource. Our source is the Centers for Medicare and Medicaid Services (CMS) “2021 SSI and Spousal Impoverishment Standards” here.
A Better Way
Now back to that old OIG report from 1988. Did it oppose the MCCA ‘88’s provisions to eliminate spousal impoverishment? No! But it did offer an alternative approach designed to achieve the same result more cost-effectively:
Certain findings from the OIG’s Medicaid Estate Recoveries report have a direct bearing on the spousal impoverishment issue. In fact, we believe this problem can be resolved at considerably less public expense than is contemplated in the current legislation. We found, for example, that many "impoverished spouses" own their homes free and clear. Their problem is cash flow, not poverty per se. We found that two-thirds of the elderly poor are unable to qualify for any Medicaid services, although many individuals with large assets are eligible for the program's most valuable benefit (institutional care). We documented that recovery of Medicaid payments from the estates of property-holding recipients is very unusual. This is true because assets are (1) transferred, sheltered, expended or concealed by recipients and their families and/or (2) public officials have taken no action to recover. In light of these facts we recommended that propertied recipients be permitted to retain their income and assets while receiving Medicaid long-term care benefits, but only in exchange for a promise, secured by a legal encumbrance, to repay the cost of their care when they no longer need their property. This repayment would be made from their estates or the estates of their last surviving dependent relatives after the property is no longer needed for a livelihood. Such a plan would resolve the spousal impoverishment problem, eliminate the most catastrophic financial impact of long-term illness and add a major nontax revenue source for Medicaid. More importantly, the risk of losing their financial legacy would influence the elderly and their heirs to seek private long-term care insurance protection and thus further relieve fiscal pressure on public programs. (p. iv)
Congress later adopted some of our 1988 report’s recommendations in the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93). It made estate recoveries mandatory, for example, but it left Medicaid’s many income and asset exemptions unprotected by the “legal encumbrance” to secure that wealth for later recovery as we had recommended. Nor did the federal government strongly enforce the newly required estate recoveries. Worse, OBRA ’93 left the home equity exemption unlimited. That only changed with the Deficit Reduction Act of 2005 (DRA ’05), which capped home equity at $500,000 to $750,000 ($603,000 to $906,000, as of 2021) at state legislatures’ discretion.
The end result is that Medicaid LTC expenditures continue to grow rapidly, the public remains desensitized to LTC risks and costs, private financing of LTC through home equity conversion and private insurance is stymied, and LTC access and quality continue to be serious problems.
If all this seems just a little too “inside baseball” to you, then you have a good idea why the complicated subject of long-term care financing policy remains a mystery to most analysts and policy makers. If you really want to understand what it means, and what has to be done to resolve the problems once and for all, you could do worse than to spend an hour reading the OIG’s report from 33 years ago. Here it is again: “Medicaid Estate Recoveries: National Program Inspection.”
I’d also like to point readers to an earlier study I conducted and wrote that led directly to the Inspector General’s report. The Medicaid Estate Recoveries Study--Volume I: Estate Recoveries in the Medicaid Program -- Health Care Financing Administration (1985). Read it and see if you don’t think we nailed the problem and the solution 36 years ago!