LTC Bullet:  Maine LTC Financing Study:  Preliminary Findings and Queries

Friday, October 12, 2012

Seattle—

LTC Comment:  Facing a budget crisis, MaineCare’s generous long-term care benefit eligibility policies—which state workers said allow “millionaires on Medicaid”—are locked in by the federal “maintenance of effort” rule, leaving the state no options but to cut benefits, providers or education.  Details follow.

*** SAD NEWS:  “Industry Mourns the Loss Joyce Ruddock, A Pioneer for Long-Term Care Insurance, Life & Health Advisor:  "Joyce Marie Ruddock, 58, of Newtown CT, passed away at home in the arms of her husband surrounded by family on Monday October 8th. . . . Joyce, a nationally recognized leader in the Medicare and long-term care insurance fields, was the President and Chief Operating Officer of LifePlans Inc."  We send our condolences to Joyce’s family and colleagues. ***

 

LTC BULLET:  MAINE LTC FINANCING STUDY:  PRELIMINARY FINDINGS AND QUERIES

LTC Comment:  The Maine Health Care Association retained the Center for Long-Term Care Reform to conduct a study of MaineCare (i.e., Maine’s Medicaid program) and long-term care financing in the state.  During the week of October 1-5, 2012, Steve Moses interviewed state officials including eligibility workers and supervisors, long-term care providers, senior advocates, long-term care insurance agents and reverse mortgage lenders in Augusta and Portland, Maine.  Following are our preliminary findings and some follow up queries.

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MaineCare and Long-Term Care Financing Study:  Preliminary Findings

  • MaineCare is in dire financial straits with long-term care expenditures contributing disproportionately to the problem.  The state’s general fund is at a “tipping point.” 
    • Unless ways can be found to control MaineCare expenses, cost overages will be taken from other state priorities, especially education.
      • Query:  What are MaineCare expenditures for nursing facilities and assisted living facilities (the Private Non-Medical Facilities or PNMI program) for the past five years?
      • Query:  What is the current budget shortfall for 2012?
      • Query:  What is the current budget breakout between Medicaid, education, and other state programs?
    • MaineCare had generous financial eligibility rules before the American Recovery and Reinvestment Act of 2009 (ARRA ’09) granted substantial FMAP (Federal Medical Assistance Percentage) bonuses to all states ($600 million over three years to Maine) conditional upon “maintenance of effort,” i.e., the state’s not tightening eligibility rules.
    • MaineCare is currently locked into retaining some of the most generous Medicaid LTC financial eligibility rules in the United States because of the extension of the “maintenance of effort” rule by the Patient Protection and Affordable Care Act of 2010 (PPACA, AKA health reform or “ObamaCare”), but without the enhanced FMAP that the ARRA ’09 provided and with flat or falling state revenue.
    • Maine faces a strong political headwind in opposition to tighter MaineCare financial eligibility rules (“I worked my whole life; I’m entitled to pass my estate to my heirs”) despite widespread agreement that Medicaid should provide for people in need and not be free “inheritance insurance” for the middle class.
      • Query:  What additional or better services could MaineCare provide to the most needy Mainers if the program did not offer such generous benefits to more affluent citizens?  For example, cover the MR/DD (Mentally Retarded and Developmentally Disabled) wait list?  Provide more adequate reimbursement to LTC providers to attract best caregivers?
  • MaineCare LTC financial eligibility rules are far more generous than required by federal law.  For example:
    • Maine allows the full federal maximum spousal impoverishment “Community Spouse Resource Allowance” (CSRA) of $113,640 as its minimum instead of the allowable federal rule of half the joint assets not to exceed $113,640. 
      • Query:  How much would MaineCare save by adopting the more common, less generous federal rule?
    • Maine is one of only 13 states and DC which allow the full federal maximum home equity exemption of $786,000 instead of the federal minimum of $525,000.
      • Query:  How much would MaineCare save by adopting the more common lower home equity exemption?
      • Query:  How much would MaineCare save if federal law did not require exemption of a home based on subjective “intent to return” but rather only when return to the home is deemed medically possible?
    • Maine allows new LTC applicants to annuitize hundreds of thousands of dollars (averaging $127,119 per case and totaling $5.8 million on 46 cases in 2011; $3.5 million on 25 cases so far in 2012) of a couple’s joint assets in the community spouse’s name with a full payout of the total amount back to the community spouse within the actuarial life expectancy of the institutionalized spouse, sometimes within less than one year.  The Deficit Reduction Act of 2005 (DRA ’05) as interpreted by the Centers for Medicare and Medicaid Services requires states to enforce this policy.
      • Query:  How much would MaineCare save if federal law and regulation allowed the state to prohibit this use of annuities to shelter assets from Medicaid spend down rules as recommended by the National Association of State Medicaid Directors?
    • The DRA ’05 attempted to close the “half-a-loaf” loophole whereby affluent recipients could give away half their assets and wait out their penalty period relying on the other half of assets, thus reducing the intended penalty period by half and sheltering half their assets.  But a new “reverse half-a-loaf” strategy is now employed by applicants and their advisers whereby annuities or promissory notes are used to “cure” half a penalty thus achieving the same effect.
      • Query:  How much would MaineCare save if the state could prohibit the use of the “reverse half-a-loaf” technique.
    • Maine applies a transfer of assets penalty for certain community services provided with state-only funds (room and board), but not for such community services covered by federal matching funds.
      • Query:  How much would MaineCare save if federal regulations allowed states to deny or delay benefits to all people who transfer resources to become eligible for Medicaid, not just for institutional level of care recipients?
  • Medicaid planning is widely available to middle class and affluent families in Maine.
    • Medicaid planning is the practice of manipulating income and assets to qualify a person who would otherwise be ineligible for Medicaid long-term care benefits due to excess income and/or assets.
    • Examples of internet ads for Medicaid planning and planners: 
      • “[T]he attorneys at the Maine Center for Elder Law, LLC often assist seniors in implementing plans that can go a long way toward protecting assets in case of future need for assisted living or nursing home care. Done early enough and if there are honest, reliable family members or others involved, such ‘pre-planning’ can save a large fraction of the seniors' assets.” (Extracted September 13, 2012 from http://mainecenterforelderlaw.com/lawyer/Kennebunk_York__ME/Medicaid_(MaineCare)_Planning_pa2953.htm)
      • “Skelton Law Offices represents individuals before the Department of Health and Human Services. The firm prepares and files applications on behalf of applicants. In the event that an application is denied, Skelton Law Offices represents clients on appeals of those denials.”  “When we talk about ‘asset protection planning’ at Skelton Law Offices, we are referring to the strategies and tools that can help you protect your money and your property from the high cost of long term care.” (Extracted September 14, 2012 from http://www.maineelderlaw.com/mainecare-planning-and-applications)
      •  “Within the MaineCare laws, there are legal ways to make ‘countable’ assets uncountable.  There are ways to protect part or all of the home and other assets.  The options depend on a number of factors that need to be explored and discussed with each person.”  Extracted September 14, 2012 from http://www.pnrelderlaw.com/faqs.php.
      • “Make sure the burial plan you purchase includes everything that may be needed. The more you prepay with money that will otherwise need to go to nursing home care, the less your loved ones will need to provide at the end.  Consider purchasing or setting aside funds for: funeral arrangements, casket, grave liners, opening & closing of graves, flowers, gratuities, limousines, police escort, obituaries, hair styling, makeup, clothing, burial plots, crypts, headstones, including placement and engraving, and expenses of the wake.”  (Extracted on September 20, 2012 from http://www.elderlawanswers.com/resources/article.asp?id=3134&section=6&state=)
    • MaineCare planning classes are also readily available.  Examples:
  • Senior advocates in Maine affirm the position that MaineCare should be used for those most in need and not to protect inheritances
    • State LTC Ombudsman Brenda Galant said she agrees “philosophically and politically” with the position that scarce Medicaid resources should go to the neediest people.
    • Representatives of Maine Equal Justice Partners said there should be “more incentives for LTC insurance and reverse mortgages” to pay for long-term care.  There is a “whole industry of lawyers” helping people preserve assets while qualifying for MaineCare.  “When people come to us wanting to do that, we say we don’t do it and they should go to the private bar.  They put assets into apartment buildings (income producing property).  Five years out, there’s no problem giving all away.  People do plan, but our clientele doesn’t have assets to plan.  Our big concern is that low income folks don’t get impacted by policy changes.”
  • MaineCare long-term care financial eligibility workers have heavy caseloads, complicated rules to enforce, and high turnover.  They complain they’re frustrated by rules that place “millionaires on Medicaid.”
    • Average caseloads in the Augusta and Portland office approach 500 per worker.  Applications must be processed within 45 days.  Most workers have less than two years in their jobs which they agree take two or three years to learn.  Training is non-existent.  Turnover is high.  Quotes from workers:
      • “We don’t feel like we’re capturing everything.”
      • “We don’t have enough staff and we have an exploding elder population and increasing need for LTC services. 
      • “Budgets are decreasing.” 
      • “It’s awfully funny that money is put into training for MaineCare, TANF, etc. while LTC is so expensive but we don’t have any training and we wouldn’t have time for it anyway.” 
    • Most MaineCare LTC applications come in by mail or fax.  Face-to-face interviews are rare though the most reliable way to validate applicants’ claims.
    • Applications completed by attorneys are “35% of our cases, but 50% of our work” in Augusta; 20 to 25 percent in Portland. 
    • Quotes from workers: 
      • “I get these huge applications from attorneys.  Kind of a running joke.  They send in stacks of stuff a little at a time.”
      • “The norm we see is $10,000 to $15,000 per case for attorney’s fees to become eligible.” 
      • “We wonder ‘who is their client?’  The infirm elder or the ‘greedy heirs.’”
      • “The wealthy think they’re entitled; the poor on the other hand are so appreciative.”
    • Welfare immigration: 
      • “Quite a few people return home to Maine because of the generosity of our eligibility rules.  Why be limited to $2,000 [in exempt assets] when you can hope to get your clutches on $10K?”
      • “People live in New Hampshire but bring family members to a York county nursing home.”
      • “We have one of the most available assisted living facility programs in the country.  A woman applied for her mother in Connecticut where [Medicaid doesn’t cover] boarding homes, so then she applied here in Maine because she has have relatives here.”
    • Both attorneys and family members representing applicants call eligibility workers directly by phone with questions and occupy many hours of the workers’ time.  “We tell people to consult an attorney after a half hour on the phone.”
    • No routine property verifications are conducted with banks, county recorders or assessor’s offices.  Applicant statements are accepted at face value unless suspicious.
    • Eligibility workers stated that over half of all MaineCare LTC applicants own homes and 90 percent of these “intend to return” to the home rendering the home exempt whether or not it is occupied and whether or not there is any medical possibility the institutionalized recipient will ever be able to return.
    • The workers estimate that approximately 40 percent of their MaineCare LTC cases used some form of asset divestment or shelter to qualify for assistance.
    • According to the workers, 80 percent to 90 percent of all LTC cases have sheltered assets in prepaid burial plans averaging $7,000 to $8,000 per recipient.  “We tell people all the time if they buy a prepaid burial, they will qualify next month.”
    • MaineCare applies no limit on household goods and furnishings.  Workers said:  “There is no limit.  We don’t even ask.  There could be antique furniture [or other valuables].”
    • Annuities:  Hundreds of thousands of dollars are transferred to the community spouse who creates an annuity and gets it all back within the actuarial life expectancy of the institutionalized spouse, sometimes in less than a year with monthly incomes from the annuities of thousands of dollars.  Fifteen percent of their cases. 
    • Annuities example:  “Every other case, maybe 2/3 of the cases from attorneys involve annuities.  I recently had a case with an 83- and 84-year-old couple, who, by advice from their attorney, purchased an annuity for $450,000 with a monthly pay out of $17,000 to make the wife eligible for MaineCare and provide income for the community spouse.  We never look at their assets after they’re eligible.  Once annuities are created, they get all the money back.  One of the requirements is that the state gets any remainder.  I’ve only had one client die where the state got any money back.  Aggravating when you see this.  They’re obviously over the spousal asset limit.” 
    • Five or 10 percent of cases involve “inaccessible assets,” i.e., property own jointly with someone else who refuses to sell his or her share.  We “ask for something in writing, then approve.”
    • Half-a-loaf:  “You apply; we do a look back and create a penalty; then you transfer half the money back and we have to forgive the remaining penalty.  We hate it, they do it.  A regular person who can’t afford an attorney does not know there is this way out.  Creates more work for us.”
    • Goold abuse:  Workers in the Augusta and Portland offices stated that hospitals and nursing homes will advise people who can’t possibly qualify for Medicaid, because of high income and/or assets, to apply nevertheless so that the cost of the Goold medical assessment, which is required prior to institutionalization, is diverted to the Medicaid program which covers the cost whether or not the applicant is ultimately deemed eligible for benefits.
    • Intent to return:  “We accept ‘intent to return’ signed by POAs (Powers of Attorney) [to exempt a home] in cases where the owner is not even competent to intend to return home.  It’s bogus.”
    • Medicaid Eligibility Quality Control (MEQC) reviews samples of Medicaid cases but reportedly does not review LTC cases.
      • Query:  How much does MaineCare pay for recipients who could, should, and would have paid for their own care in the absence of overly generous eligibility rules and due to inadequate numbers of insufficiently trained and over-worked eligibility staff?
      • Query:  Could MEQC review a valid random sample of LTC cases to estimate the cost of ineligible cases across the caseload?  If not, could a private contractor conduct such a review on contingency, i.e., in exchange for a percentage of funds recovered from ineligible cases?
  • MaineCare recovers benefits paid to recipients over the age of 55 after their deaths out of their estates as required by federal law (Omnibus Budget Reconciliation Act of 1993 or OBRA ’93)
    • MaineCare recovered an average of $6.7 million dollars per year for State Fiscal Years (SFY) 2009-12 at a cost of $273,000 per year for four staff positions and overhead, which is an excellent cost to recovery ratio of 24.5 to one.
    • MaineCare estate recovery exempts the first $7,000 of each estate from recovery.
    • Maine’s program does not use “TEFRA” liens.  The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA ’82) authorized states to place liens on real property of institutionalized Medicaid recipients with no surviving exempt dependent relatives as a way to ensure the property remains available for recovery from the recipient’s estate after death.
    • Federal law allows recovery from spouses of predeceased Medicaid recipients but only after the death, and from the estate of, the surviving spouses.  Maine’s estate recovery program does not pursue “spousal recoveries.”
    • As of the latest available comparable data (2004), Maine recovered from estates at a rate of 2.5 percent of total Medicaid nursing home expenditures, which is very good as compared to the average for all states of .8 percent.  Oregon, however, recovered at a rate of 5.8 percent, approximately $7.6 million per year more.
      • Query:  How much more could Maine recover from the estates of deceased recipients and their spouses if the state hired more estate recovery staff, eliminated the $7,000 exemption, implemented TEFRA liens, recovered from spouses’ estates and implemented additional “best practices” perfected in other states, especially Oregon?
  • MaineCare’s LTC providers face challenges
    • Maine’s nursing home patient acuity is among the highest in the United States.  Residents with dementia are 55 percent, the most of any state.  Those with low care needs are only two percent, the 49th lowest in the U.S.
    • 73 percent of nursing home residents and 80 percent of assisted living residents are on MaineCare.
    • Yet, MaineCare pays nursing homes $189 per day, or only 69 percent of the private pay rate, which is $275 per day.
    • The MaineCare rate for assisted living (PNMI) is about half of the private rate:  a little less than $100 compared to $200 for private payers.
    • Such low rates force caps on available Medicaid beds.
    • According to a study conducted on behalf of the American Health Care Association, MaineCare reimburses nursing facilities $21.21 per bed day less than allowable costs.
    • “For every dollar of allowable cost incurred in providing long term care for a Medicaid patient in 2011, the Medicaid program reimbursed approximately 90 cents on average. Unprecedented state budget deficits and the expiration of federal stimulus funds on July 1, 2011 contributed to the second lowest percentage of cost coverage in the ten years that this annual report has been compiled.” (Eljay report)
    • One provider said “We probably lose $250,000 to $350,000 per year covering 50 Medicaid residents.  Our ten residents on Medicare balance the Medicaid losses, but we’re still trying to rebound from the Medicare rate reduction last October.”  Further Medicare cuts are anticipated and Medicare occupancy is declining as well, now down to only 10 percent.
    • Inadequate reimbursement “undervalues the people who work in long-term care by forcing salaries and benefits down to the minimum to balance.”
    • Guardians or patient representatives with power of attorney sometimes keep recipient’s Social Security income instead of turning it over to offset Medicaid’s cost of care.  Facilities are burdened with collecting these funds but “safe discharge” rules prevent their terminating services for lack of payment.  Providers estimated this is a $500,000 problem statewide annually.
    • Some facilities have closed already due to high MaineCare occupancy and low reimbursements.  Others have cut back on the number of available Medicaid slots.  And more are likely to follow suit in the absence of more adequate MaineCare reimbursement rates in the future.
  • Private financing alternatives that could relieve financial pressure on MaineCare’s long-term care program
    • Asset spend down is very limited due to . . .
      • MaineCare’s generous LTC financial eligibility policies resulting in relatively easy access to benefits with limited spend down.
      • The difficulty of enforcing current rules because of the limited number, inadequate training and high turnover of eligibility workers.
      • The ready availability of Medicaid planning advice on methods of artificial self-impoverishment.
    • Enhanced estate recovery:  limited potential as discussed above
      • Estate recovery staff estimated that the potential for increased recoveries is $1.5 to $2.0 million per year.
      • Even higher recoveries might be achieved by systematically researching and implementing best practices in other states.
    • Long-term care insurance
      • Growth of the LTC insurance market is moderate, flat or declining depending on whom you ask.  71,156 LTC policies are “in force.”
      • Ten carriers market the product in Maine, but only six actively.  Very few agents specialize in LTC coverage.
      • Retirees have been priced out of the market leaving worksite sales the most promising.
      • Problems include “press, price and perception.”  Yet “good coverage is available for $20 to $40 per pay period.” 
      • Hybrid products, combining LTC coverage with life insurance or annuities, are becoming more popular as growth of traditional, individual policies levels out.
      • Maine’s LTC Partnership Program, which provides Medicaid spend down forgiveness equal to the qualified LTC insurance protection purchased and used, has helped but only marginally in the absence of strong education and promotion by the state.
      • Maine has a 100 percent state tax deduction for qualified LTC insurance premiums.
      • Bureau of Insurance regulation of LTC insurance in Maine is attentive and fair according to discussions with BOI staff and agents.
      • Maine publishes consumer guides to long-term care insurance and has a very generous policy allowing exchange of non-Partnership for Partnership LTC insurance policies.
      • Nevertheless, easy access to MaineCare benefits after the insurable event occurs has reduced demand for private LTC insurance.  One agent said “attorneys call to say they need a Medicaid annuity.” 
    • Reverse mortgages
      • These financial products enable people 62 years or older to tap equity in their homes in the form of lump sum payments, monthly payments or, most commonly, as a line of credit to be used as needed.
      • Like LTC insurance, reverse mortgages have faced challenges of “press, price and perception.”
      • New “Saver Reverse Mortgages” are popular having reduced closing costs by allowing less equity to be drawn.
      • Formerly used mostly by people in desperate financial crises, more people today use reverse mortgages to supplement and complement their overall financial planning.
      • Reverse mortgages are sometimes used to fund home care but almost never to purchase LTC insurance or to finance care for an institutionalized spouse.
      • MaineCare’s $786,000 home equity exemption probably discourages the use of reverse mortgages to fund long-term care.