Friday, June 23, 2017 Seattle— LTC Comment: Kaiser Family Foundation researchers despair of reducing Medicaid LTC expenditures, but their “literature review” is incomplete, misleading and risky.
LTC BULLET: IS IT REALLY HOPELESS TO REDUCE MEDICAID LTC COSTS? LTC Comment: The news is full of scary stories about Republicans’ plans to curtail Medicaid spending. Are these reports valid or is the risk of letting the Medicaid fiscal monster continue to grow even more dangerous? That’s a good question. The best way to answer it is to examine the relevant empirical research bearing on the subject. To do so would entail reviewing the evidence on both sides of the question. First, you’d need to ascertain whether current Medicaid spending growth is sustainable. If not, then you’d review the available approaches to control spending for their potential success. Researchers representing the Kaiser Family Foundation (KFF) skipped the first step and went directly to debunking virtually all possible approaches to reduce Medicaid expenditure growth. We’ll take them to task today regarding their findings that bear on long-term care financing. Following are quotes from KFF’s newly published “Strategies to Reduce Medicaid Spending: Findings From A Literature Review” authored by Joshua M. Wiener, Melissa Romaire, Nga (Trini) Thach, Aubrey Collins, Konny Kim, Huiling Pan, Giuseppina Chiri, Anna Sommers, and Susan Haber of RTI International and MaryBeth Musumeci and Julia Paradise of the Kaiser Family Foundation. Our comments follow each quote. KFF Strategies: “The Congressional Budget Office (CBO) estimates that the AHCA’s Medicaid financing changes, along with its repeal of enhanced federal matching funds for the Affordable Care Act’s Medicaid expansion, would reduce federal Medicaid spending by $834 billion from 2017 to 2026, resulting in a 24% reduction in federal Medicaid funds in 2026. States are unlikely to be able to replace a loss of federal funds of that magnitude by increasing taxes or reducing spending in other areas, such as education.” (p. 1) LTC Comment: But that’s exactly what states have been forced to do to prop up explosive Medicaid expenditure growth under the current system. To support Medicaid, they increase taxes which impairs their economies. Medicaid crowds out other state spending priorities, including education, more each year. It is disingenuous to discredit efforts to control Medicaid spending without first asking whether, and honestly acknowledging that, its current cost growth is unsustainable. KFF Strategies: “This issue brief considers the feasibility of realizing substantial Medicaid cost savings through strategies aimed at improving delivery system and administrative efficiency. We review the literature about the potential for Medicaid cost savings from . . . four strategies related to long-term services and supports: (5) tightening financial eligibility rules for long-term care services, (6) promoting private long-term care insurance, (7) expanding home and community-based services (HCBS), and (8) increasing use of managed long-term services and supports. We conclude that, while there may be other reasons to pursue these policies, such as improved health outcomes or increased enrollee satisfaction, the literature does not provide strong evidence for achieving large Medicaid savings through adoption of these policies.” (p. 1) LTC Comment: OK, let’s review their discouraging findings and see if they hold up under scrutiny. KFF Strategies: “Empirical evidence indicates that any program savings from state strategies to tighten financial eligibility rules for individuals seeking Medicaid long-term care services would be small and offset to some extent by additional administrative expenses. These strategies include curtailing asset transfers, increasing estate recovery efforts, and including retirement accounts as countable assets.” (p. 3) LTC Comment: Well, we certainly think savings from those strategies would be substantial. See any of our reports here for the evidence. So, why do they think otherwise? KFF Strategies: “To capture additional private resources to offset Medicaid spending, some observers have proposed tightening transfer of asset rules and more aggressively enforcing these rules and estate recovery.” (p. 13) LTC Comment: Yes, and we’re among those observers as these authors acknowledge by citing two of our papers on the subject in footnotes: #121 Moses S. Medicaid Planning for Long-Term Care. Briefing paper #3. 2012. http://www.centerltc.com/BriefingPapers/Overview.htm and #122 Moses S. Medicaid Long-Term Care Eligibility. Briefing Paper #2. 2012. http://www.centerltc.com/BriefingPapers/Overview.htm. KFF Strategies: “Most empirical research on transfer of assets has found that relatively little transfer takes place or that the amount transferred is small.” (p. 14) LTC Comment: Most is not all. Transferring assets may have increased Medicaid spending by as much as $1.5 billion in 2014 alone according to one study. But focusing only on asset transfers ignores the more widely practiced techniques of Medicaid planning. Indeed, asset transfers are only the tip of the Medicaid planning iceberg. These researchers evade this far bigger problem by ignoring the expansive legal literature on the methods and extent of artificial self-impoverishment to qualify for Medicaid LTC benefits. We explained how analysts who prefer government-based LTC financing debunk private-sector solutions by equivocating on key concepts like “spend down,” “asset transfers” and “out-of-pocket costs” in “LTC Bullet: LTC at a Crossroads,” Friday, June 3, 2016. KFF Strategies: “Using the Health and Retirement Study, Johnson found that the 2012 median financial wealth for people age 65 and over with two or more activities of daily living (ADL) impairments was $8,300, compared to $104,300 for those who did not have limitations.” (p. 14) LTC Comment: Focusing on people at the median of wealth and below is another way these researchers minimize the potential of controlling Medicaid financial eligibility. Of course most people who end up on Medicaid are poor. The more important questions are (1) why and how people above the median qualify routinely for those benefits and (2) did people spend down their wealth on long-term care or artificially self-impoverish to qualify for Medicaid? We demolished an earlier argument by KFF that only poor people qualify for Medicaid by showing that most Medicare beneficiaries with above median income and assets qualify easily for the program. See “LTC Bullet: Hoist with its Own Petard,” Friday, April 28, 2017. Furthermore, basing any conclusions on the “Health and Retirement Study” and its auxiliary Asset and Health Dynamics among the Oldest Old (AHEAD) study is highly dubious for many reasons we explained in “LTC Bullet: Behind AHEAD,” Friday, September 2, 2016. KFF Strategies: “Current efforts to recover Medicaid LTSS expenditures from the estates of deceased beneficiaries have not yielded large amounts of funds.” (p. 14) LTC Comment: Well, of course they haven’t. Given the incentives in public policy to hide, transfer or convert countable assets as early as possible, it’s a wonder anything remains in recipients’ estates after they die. Remove those disincentives to responsible LTC planning and more people will save, invest or insure for LTC, become private payers, and avoid Medicaid dependency. Even under the current debilitating federal laws and regulations, some states do estate recovery better than others. We examined estate recovery “best practices” based on interviews with experts in eight leading states in “Maximizing NonTax Revenue from MaineCare Estate Recoveries,” May 15, 2013. KFF Strategies: “Because of the complex interaction between Medicaid rules with state property, probate, homestead and creditor laws, recovery efforts are conducted on a case-by-case basis, a time-consuming and potentially expensive process.” (p. 15) LTC Comment: Nonsense. States that do estate recovery well bring in $10 to $15 dollars of non-tax revenue for every dollar they spend on the effort. What business wouldn’t spend a dollar more to increase profits by $15? See my 1988 report for the DHHS Inspector General for a full explanation of how Medicaid estate recovery works and what its potential could be absent federal laws and regulations that prevent its efficient use. Medicaid Estate Recoveries: National Program Inspection -- Office of Inspector General (1988). KFF Strategies: “The average personal retirement value for all households was $15,069, but the median holding was zero for both single and married couples’ households. Thus, including retirement accounts is unlikely to yield significant savings, again because few Medicaid beneficiaries are likely to have high balances in their accounts.” (p. 15) LTC Comment: This is specious reasoning. Again, of course most Medicaid LTC recipients are poor and have small retirement account balances. But that does not mean we should ignore those who do have large accounts. Nor should we ignore how Medicaid recipients became poor. Did they spend down on care or use the many techniques of Medicaid planning to appear poor? KFF Strategies: “Retirement accounts are generally excluded from determining Medicaid eligibility because they are the source of income for retirees and must be withdrawn at a regular schedule designed to match projected mortality rates.” LTC Comment: True, but consider the consequences. Nearly all that income must be used to offset Medicaid’s cost for recipients’ care. Thus instead of consuming their retirement accounts to purchase quality care in the private market in the most appropriate venue, these people end up in nursing homes on public welfare. Furthermore, once they qualify for Medicaid, care providers receive the welfare program’s dismally low reimbursement rates, which drag down quality for everyone, whether they rely on Medicaid or pay privately. KFF Strategies: “The private LTC insurance market is in sharp decline, and the future role of the product as a source of financing for LTSS for the general population is in doubt.” (p. 16) LTC Comment: And whose fault is that? Medicaid pays for long-term care after the insurable event occurs thus desensitizing the public to LTC risk and cost and crowding out demand for private LTC insurance. To add insult to injury, the Federal Reserve forced interest rates to near zero obviating the LTCI insurance market’s profitability. The real problem is perverse incentives in public policy, not any shortcoming with the long-term care insurance product or carriers. Remove those perverse incentives: let the market determine interest rates, target scarce Medicaid benefits to the needy, put home equity at risk for long-term care, and before long Medicaid LTC expenditures will plummet, the reverse mortgage and long-term care insurance markets will thrive, and everyone will have access to better long-term care. KFF Strategies: “Although proponents of HCBS [home and community-based services] believe savings can be achieved by substituting high-cost institutional services with lower cost HCBS, the research literature is mixed.” (p. 18) LTC Comment: “Mixed” is a very generous description of that research, most of which clearly indicates that HCBS delay, but usually do not replace institutional care and the two combined, HCBS and nursing home care, end up costing more overall. What these researchers ignore is the reason we have a nursing home bias in the system in the first place. Medicaid made nursing homes virtually free in 1965 and the rest is simply the logical result of such a policy. Without the “Medicaid trap” making people complacent about long-term care until they need it, more would plan early for LTC risk and cost. People who have prepared to pay privately for long-term care don’t go to nursing homes unless they need highly skilled or post-acute care. Rather, they buy personal services provided in their own homes. HCBS do not save Medicaid money; such services cost more overall; the way to expand their availability is to have fewer people reliant on Medicaid which cannot afford HCBS and more people able to purchase services they prefer in the private market. KFF Strategies: “The expansion of programs that use MCOs [Managed Care Organizations] to integrate LTSS [AKA LTC] and medical care could facilitate improved services and lower costs. However, despite the popularity of these initiatives, there is a marked paucity of evaluations of their effectiveness in lowering unnecessary utilization and expenditures and improving quality of care.” (p. 22) LTC Comment: That’s a convoluted way to say managed long-term care doesn’t work. But managed care works fine in the Medicare Advantage program, where people voluntarily trade some choice and flexibility for extra cost-free benefits. So what’s wrong with managed long-term care? What’s wrong is superimposing it over the complicated Medicaid LTC mess. Because of Medicaid’s easy financial eligibility rules, too many people rely on it. Because of Medicaid’s institutional bias, too many recipients receive care in expensive nursing homes. But because HCBS cost more overall than institutional care, Medicaid can’t afford to offer mostly HCBS that most people prefer instead of nursing home care most would rather avoid. Once you have that Rube Goldberg system in place, putting an MCO in between the patient and the provider only adds complication and increases costs. Final LTC Comment: Ironically, these researchers who defend the current Medicaid-based long-term care system against any and all efforts to change it are the real “conservatives.” They cling to the existing system and refuse to hear, see or speak anything that challenges it. The true “progressives” are those who recognize America’s dysfunctional long-term care system is well along the slippery slope to unsustainability and want to fix it. |