 LTC Bullet: How Medicaid Subsidizes the Funeral Industry Friday, February 16, 2024 Seattle— LTC Comment: Medicaid channels billions of dollars to the funeral business that could pay for better long-term care for the needy. Evidence and consequences after the ***news.*** *** ILTCI 2023: Last year’s Intercompany Long-Term Care Insurance Conference was a huge success! Over 950 attendees from across the US attended. Organizers say: “We look forward to bringing you another amazing conference in 2024. Here’s how our attendees self-identified the area of the industry they work in:
Check out the schedule here. Review session titles here. Register here. See you there. “Stephen Moses (Center for LTC Reform president) will present two new papers ‘Long-Term Care: The Problem’ and ‘Long-Term Care: The Solution.’ He will explain why LTC financing reform has languished since the Great Recession, but will flourish anew soon. Steve will also preview his forthcoming paper ‘Ending Structural Long-Term Care Racism.’ Don’t miss this review of the past and forecast of the future by the 2019 ILTCI Recognition Award recipient.” *** *** MUD SLIDE: We thank Center corporate member Long Term Care Associates for bringing this story to our attention. Here it is verbatim as they explained the situation. Some of the links are broken but you can see pictures at the GoFundMe site. The Center for LTC Reform made a contribution to the GoFundMe to help and we encourage others to do the same. Here’s the story as LTCA told it: “Many readers and colleagues know Rich Wierman, an LTCA producer for over 20 years. The Baldwin Hills, CA home [buried in mud] belongs to his daughter Kristy and son-in-law Matt, who find themselves overwhelmed after ‘nearly every room of their home is filled with about 4 feet of mud.’ [LTCA’s Steve Forman] asked Rich if [he] could share their story in his words: Shock: "This tragedy is huge and hard to believe. This home in LA was Matt and Kristy’s first home, an extensive fixer-upper they poured their lives into. They finished the last remodel last year and it was beautiful. Matt was there all last week and I picked him up from the [Seattle] airport Friday night and he mentioned he was concerned about the torrential rains coming that weekend. Sunday night at 10:30pm, their cameras and alarms went off on their phones. Then they went dark, and a neighbor confirmed their fears. Kristy called me at 11:00pm and told me the house was destroyed. Matt flew there in the morning and has spent all week assessing the damage, clearing the house, and trying to determine what to do next. It was confirmed that insurance does not cover natural disasters like this. What a huge shock and disappointment!" Rebuild: “I hope you'll visit Kristy and Matt's GoFundMe page and help in their time of need. Thank you for your generosity! ***
LTC BULLET: HOW MEDICAID SUBSIDIZES THE FUNERAL INDUSTRY LTC Comment: Medicaid is the biggest long-term care (LTC) payer in the United States. It contributed 43% of the $530 billion Americans spent on LTC in 2021. Eligibility for Medicaid is means-tested. Recipients are allowed to retain no more than $2,000 in countable assets on average. Wealth in excess of that amount is supposed to be spent down. But Medicaid does not require that excess assets be spent down for medical or long-term care. Program applicants may instead reduce their wealth to the usual $2,000 qualifying level by converting countable into exempt assets. Exempt assets are virtually unlimited. They include most home equity, tax-favored retirement accounts, a vehicle, a business and many more. But Medicaid recipients hold one exempt asset more than all the others combined. According to ElderLawAnswers: “By purchasing a prepaid funeral contract, you can turn available assets into exempt assets that won't affect your eligibility.” Which final expenses can applicants prepay with a funeral trust to achieve Medicaid financial eligibility more quickly and easily? According to the American Council on Aging, funds in a funeral trust can cover “funeral home usage, service charge of funeral director and staff, clergy fee, musicians for service, death certificate, printed death notices, embalming, casket/burial vault, burial plot, headstones/ monuments, cemetery fees, hearse/limousines, dressing and casketing, clothing, makeup and hairstyling, cremation, urn” and in some but not all states, flowers and “travel expenses for relatives to come to the funeral.” How much do funerals cost and how much of that expense can Medicaid applicants use to facilitate and expedite their spend down? USA Today reports: “The median cost of a funeral is $7,848, according to a recent study conducted by the National Funeral Directors Association. The median cost of a funeral with cremation comes in at $6,970.” How does the average value of a funeral trust purchased to achieve Medicaid eligibility compare with the average cost of a funeral? Roughly double. Irrevocable Funeral Trusts [IFTs] can be established for each spouse. Typically, an elderly couple applying for Medicaid, would establish two trusts, each for around $10,000 – $15,000. These trusts would lower the couple’s countable assets for Medicaid purposes by $20,000 – $30,000. Furthermore, some states allow IFTs to be established for one’s adult children. Some of these states include Arizona, Colorado, Illinois, Missouri, and Oregon. (American Council on Aging) That is a lot of money diverted from private long-term care spend down to funeral expenses. But how prevalent is this practice? Very little evidence exists about the level of non-countable assets retained by Medicaid LTC recipients. More studies are needed. One Government Accountability Office (GAO, 2014) analysis did address the question head on ten years ago. “GAO identified four main methods used by applicants to reduce their countable assets—income or resources—and qualify for Medicaid coverage” including “spending countable resources on goods and services that are not countable towards financial eligibility, such as prepaid funeral arrangements.” (GAO, 2014, “Highlights” page). GAO concluded “Nearly 75 percent of applicants owned some non-countable resources, such as burial contracts; the median amount of non-countable resources was $12,530” (Ibid.). These findings were based on a small sample in only three states. They are not generalizable to the entire population of Medicaid recipients. But they do dramatically suggest the need to conduct more studies that are applicable to the broader base. Just assume for a moment that three-fourths of all Medicaid recipients divert $12,530 from private spending to prepay funeral costs. How much money are we talking about? “KFF estimates that nearly 6 million people receive Medicaid long-term services and supports …” (KFF, 2023). If 4.5 million Medicaid recipients (75%) protect $12,530 each from Medicaid spend down requirements by purchasing prepaid funeral contracts, the total comes to $56.4 billion. That is 10.6% of the $530 billion Americans spent on LTC in 2021 and 24.9% of Medicaid’s total $226.7 billion LTC expenditures in that year. KFF states that 12.5 million are jointly enrolled in Medicare and Medicaid. “In 2019, combined Medicare and Medicaid spending on dually eligible beneficiaries totaled $440.2 billion of which Medicaid accounted for $164.3 billion (37 percent).” (MACPAC) These “dual eligibles” are the two programs’ most expensive enrollees. If 9,375,000 dual eligibles (75%) protect $12,530 each using prepaid funeral contacts, the total comes to $117.5 billion or 26.7% of the entire cost of dual eligibles for both programs and 71.5% of Medicaid’s share. Medicaid’s policy of allowing applicants to avoid spending down assets for long-term care by purchasing prepaid funeral contracts is ethically dubious. It reduces market-rate compensation to LTC providers, replacing it with Medicaid reimbursements that are notoriously low, often less than the cost of the care provided. Inadequate revenue translates into access and quality problems, caregiver shortages due to poor compensation, and excessive residual caregiving for unpaid family members. The policy harms Medicaid, Medicaid recipients, and taxpayers while it benefits the funeral industry, which has a less than stellar reputation. According to the Wall Street Journal: “Unethical funeral homes have exploited grieving customers for decades.” Subsidizing the funeral industry at the expense of LTC for the needy is only one of many ways current Medicaid eligibility policy impairs care access and quality. To make sense of what is wrong with LTC and why, read the Paragon Health Institute’s “Long-Term Care: The Problem” and “Long-Term Care: The Solution” and watch this “virtual LTC event” featuring age wave visionary Ken Dychtwald and leading LTC researchers. |