 LTC Bullet: There Is No “LTSS Gap” Friday, August 9, 2024 Seattle— LTC Comment: This Health Affairs article offers a solution without a problem. We explain below. LTC BULLET: THERE IS NO “LTSS GAP” LTC Comment: A new Health Affairs “Forefront” article proposes solutions for a problem that does not exist. We offer the following rebuttal as part of our “Standing Guard” series. Those 101 LTC Bullets (to date) correct errors in “peer-reviewed” journal articles that occur because scholars ignore how Medicaid LTC actually works in practice. They cling instead to myths sustained by a short-sighted literal reading of the law and regulations. They ignore real-world evidence from outside their academic echo chamber. Here’s the latest example. Laura Benzing, Hannah Godlove, and Megan R. Burke. "How States Can Support Individuals In The Long-Term Services and Supports Gap." Health Affairs Forefront, July 24, 2024. DOI: 10.1377/forefront.20240723.226615. You can find my comment on this article below it on the Health Affairs and at the end of today’s LTC Bullet. Following are quotes from the LTSS Gap article followed by our LTC Comments. LTSS Gap: “If your income is low enough, you might qualify for support in your home and community or a nursing facility through Medicaid, the primary payer of LTSS [long-term services and supports]. … But what about the large population of middle-income Medicare beneficiaries nationwide who do not qualify for Medicaid and cannot afford to hire a home health aide? These individuals fall into an ‘LTSS gap’ where care is difficult, if not impossible, to access. Today, nearly 40 million unpaid family caregivers provide 36 billion hours of care, but this is an unsustainable model as family members live further apart and balance multiple demands.” LTC Comment: This article begins by describing how hard it is for Americans to get assistance with activities of daily living. Medicare won’t pay for LTSS. Private care is excessively expensive. Low-income individuals turn to Medicaid. But middle-income people are presumed to be ineligible. Nor can they afford a private home health aide. Alas, they fall into an “LTSS gap.” Either they go without needed care or they become a burden on millions of unpaid family caregivers. Everything in this opening assessment is either completely wrong or misunderstood and misinterpreted as explained below. LTSS Gap: “State Medicaid income eligibility for the aged, blind, and disabled population varies across states from 75 percent to 138 percent of the federal poverty level. Because 138 percent of poverty is the top of the threshold, we define ‘near Medicaid eligibility’ as individuals who have incomes between 139 percent and 221 percent of poverty. We use 221 percent as the upper bound because, among states offering a ‘special income pathway’ to home- and community-based services (HCBS) for individuals with an institutional level of care need, the 300 percent federal benefit rate (which translates to approximately 221 percent of poverty) is a common income eligibility limit.” LTC Comment: What’s wrong with this description of Medicaid’s ostensibly draconian income eligibility standard? It seems to come right out of federal and state laws and regulations. But it ignores how the system actually works in practice. Most state Medicaid programs allow applicant/recipients (ARs) to subtract their personal medical or LTC expenses from their income before applying a low-income standard. Other states cap income at 300 percent of the SSI monthly limit but allow ARs to shift excess income into diversion trusts, making them eligible despite having large incomes. The bottom line is the same everywhere. There is no firm upper limit on income. As a rule of thumb, income up to the monthly cost of a nursing home, often $8,000 to $10,000, rather high income, is not disqualifying. The article’s assertion that Medicaid LTC eligibility is limited to people with 75%, 138%, 221% of the poverty level … or any other set amount is wrong and worse, misleading. LTSS Gap: “Some individuals may meet Medicaid income eligibility criteria but do not qualify for Medicaid because of the asset limit, which, in many states, means an individual can retain a minimal amount of personal assets (usually about $2,000).” LTC Comment: Medicaid ARs are limited to $2,000 of countable assets. But most large assets held by the middle class are exempt, such as a minimum of $713,000 and a maximum of $1,071,000 of home equity depending on the state. Furthermore, an unlimited amount of countable assets can be converted easily to exempt status by purchasing any of a long list of exempt assets available from financial advisors or online. These non-countable assets include one vehicle, a business, prepaid burial plans, IRAs in payout status, home furnishings and all personal belongings. In 2014, the Government Accountability Office (GAO) found that 74 percent of its sample “owned at least some resources that were not countable as part of their financial eligibility determination … .” Reasonably $100 billion or more could be diverted from private LTC spending to a Medicaid liability nationwide in this way. For practical purposes, there is no limit to how much wealth Medicaid ARs may retain in or convert to exempt status. LTSS Gap: “Individuals near Medicaid eligibility are unlikely to qualify for Medicaid or be able to afford LTSS out of pocket. … The literature refers to this broad population who cannot always afford LTSS as ‘the forgotten middle’ or ‘middle income.’ Understanding the characteristics and needs of individuals near Medicaid eligibility is the first step to addressing the LTSS gap.” LTC Comment: Neither high income nor high assets prevent upper-middle-income people from qualifying for Medicaid LTC benefits. The “forgotten middle” is a fallacy. At most, there remain only some “forgotten wealthy,” people with so much income and resources, they would not qualify in spite of Medicaid’s very generous financial eligibility rules. The problem is not too few people on Medicaid, but too many. By making government LTC benefits so easy to obtain late in life while preserving exempt wealth, Medicaid desensitized the public to LTC risk and cost leaving most Americans dependent on public assistance when they confront catastrophic LTC costs. By covering too many people, Medicaid’s resources became inadequate to ensure access to quality care, especially in the home and community-based settings citizens prefer. But the situation is even more tragic and ironic than that. Medicaid hurts most the very same people who need it most. LTSS Gap: “Older adults of color are disproportionately represented in the near Medicaid-eligible population, potentially furthering disparities in care.” LTC Comment: If there is a near-Medicaid-eligible population with low income and assets, it primarily includes socioeconomically marginalized groups, including racial minorities. Medicaid financial eligibility rules devastate such individuals and families. They lose everything quickly to sky-high private LTC costs. They tend to live in neighborhoods with nursing homes and home care providers that rely heavily on Medicaid’s low reimbursement rates and lack supplemental philanthropic funding. They receive the low-cost care of uncertain quality that Medicaid is reputed to provide. Compare affluent people, who qualify for Medicaid as easily and with less financial disruption because they can reconfigure their income and assets. As they “spend down” by purchasing exempt assets, they retain “key money” so they can pay privately initially for care. Key money enables them to gain admission to the best nursing homes and other LTC providers that are desperate for private payers at rates 1.5 times what Medicaid pays. They co-opt the best care Medicaid offers to the exclusion of poor people who lack the private funds to buy their way into the better care. This reality is the root and cause of the “structural LTSS racism” widely reputed in the peer-reviewed academic literature to be endemic in America’s long-term care service delivery and financing system. LTSS Gap: “As the first state to eliminate the asset test starting in 2024, California’s Department of Health Care Services used a mix of Section 1115 Demonstration authority and the State Plan authority granted to states by the Social Security Act (note 2).” LTC Comment: By eliminating its asset test for Medi-Cal LTC eligibility, California threw the public welfare gates wide open for wealthy people to access and appropriate scarce resources formerly, and more appropriately, preserved for people in need. This policy reduces the incentive for people with substantial wealth to plan ahead and pay privately for long-term care. It exacerbates the problem of structural LTC racism by further crowding out socioeconomically marginalized groups from Medicaid’s better care options. LTSS Gap: “State policy makers can consider opportunities to address the LTSS gap under existing authorities including expanding Medicaid eligibility and State Plan Amendments, Section 1115 Demonstrations, Older Americans Act funding, and other state-driven initiatives.” LTC Comment: Solving an “LTSS gap” that does not exist in the first place makes no sense. In fact state Medicaid programs have pushed such “solutions” to the limit of their ability to pay for them already. Medicaid nursing home and home care expenditures continue to rise annually. Home care options that were supposed to save money have not. Medicaid home care waiting lists approach 700,000 and people who receive home care often need institutional care eventually anyway. LTSS Gap: “One strategy for meeting the LTSS needs of individuals near Medicaid eligibility is to adjust Medicaid requirements so more people can access Medicaid. States could make Medicaid accessible to more individuals by increasing income limits, increasing or eliminating asset limits, or implementing medically needy programs through State Plan and 1915 Waiver authority.” LTC Comment: Loading up Medicaid with more high-cost LTC enrollees is the worst possible idea. It would vastly worsen the already serious problem of structural LTC racism. Far better to retarget Medicaid LTC benefits to those who need them most and redirect the middle class and affluent to early LTC planning to become private payers eventually. For a complete analysis of why that solution is best and how to achieve it, see the Paragon Health Institute’s “Long-Term Care: The Problem” and “Long-Term Care: The Solution.”
Following is my reply to the Health Affairs article "How States Can Support Individuals In The Long-Term Services and Supports Gap” Although posted 10 days ago, none of the article’s authors have replied to my criticism.
Respectfully, there is no “LTSS Gap.” The income and resource limits cited in this paper do not prevent affluent people from qualifying for Medicaid LTSS benefits. Most state Medicaid programs deduct private medical and LTSS expenses from income before applying a low-income standard. The others allow income diversion trusts to enable higher income people to qualify. A good rule of thumb: income below the cost of a nursing home, easily $8,000 to $10,000 per month, rather high income, is not disqualifying. Likewise, the $2,000 resource limit cited in the article applies only to countable assets. But most wealth held by middle class and affluent people is exempt, including most home equity, a vehicle, a business, prepaid burial plans, IRAs in payout status, home furnishings and all personal belongings. Medicaid LTSS eligibility rules place no limit on exempt assets. All countable resources are easily converted to exempt status by using the former to purchase the latter. That method of spending down may account for $100 billion or more of excess Medicaid LTSS spending. The real LTSS problem is not that too few people qualify for Medicaid, but rather too many do. By making LTSS benefits so easily available late in life for middle-class people, Medicaid created a moral hazard. It enabled the public to ignore LTSS risk and cost, avoid the necessity to save, invest or insure to prepare for extended care in old age, and still receive care when needed while preserving substantial exempt wealth. Consequently, few people prepare ahead for LTSS and most turn to Medicaid when they require care. The tragic irony is that this system overloads Medicaid with too many enrollees causing scarce resources to be spread too thinly. Medicaid’s reputedly low-cost care of uncertain quality harms the program’s neediest enrollees most. Socioeconomically marginalized people, including racial minorities, tend to live in neighborhoods with nursing homes and other LTSS providers that are heavily dependent on Medicaid’s low reimbursements and unlikely to have supplemental philanthropic funding. Poor people receive the dregs of Medicaid LTSS care. More affluent Medicaid enrollees live in nicer neighborhoods with better LTSS providers that are less dependent on Medicaid’s low reimbursements and more likely to have philanthropic support. As they “spend down” to Medicaid’s resource limit by purchasing exempt assets, these more financially comfortable applicants hold back “key money” so they can pay privately at admission. Because LTSS providers are desperate to attract private payers at 1.5 times what Medicaid pays, this key money ensures these better off enrollees have access to the best LTSS care Medicaid has to offer. A large and growing peer-reviewed literature on “structural LTSS racism” reflects this system’s inequitable effects, hurting the economically disadvantaged while significantly benefiting more prosperous people. California’s unusually lenient financial eligibility system, including its recent elimination of any asset test for Medi-Cal (Medicaid), is the most egregious example of this problem. Nothing will change until scholars take into account how Medicaid LTSS financial eligibility really works in practice. They should stop assuming incorrectly that ostensibly strict rules in the statute and regulations actually prevail. |
