 LTC Bullet: Understanding Medicaid Spend Down Friday, July 12, 2024 Seattle— LTC Comment: To fix long-term care you must understand Medicaid spend down. We explain after the ***news.***
*** TWO BIRDS,
ONE STONE. McKnights is a national news brand specializing in
institutional long-term care, senior living and home care. This week
McKnights published the same column I wrote about senior living with
different titles in two of its venues. You can read “What
assisted living needs versus what it gets” in McKnights Senior
Living or “What
nursing homes need, versus what they get” in McKnights LTC News
depending on your interest. Same piece. Thanks to McKnights for this
unique dual coverage. The *** AI TOLD YOU SO. Today’s LTC Bullet claims people can qualify for Medicaid LTC benefits without spending down assets for medical or long-term care expenses. If you don’t believe me, then consider this reply from Perplexity.ia to my query. Question: “How do people spend down to qualify for Medicaid LTSS benefits without spending wealth on medical or LTSS expenses?” Answer from Perplexity.ia: “People can spend down to qualify for Medicaid long-term services and supports (LTSS) benefits through several methods that do not involve directly spending wealth on medical or LTSS expenses:
It's important to note that Medicaid eligibility rules are complex and vary by state. Additionally, some spend-down strategies may have tax implications or affect future eligibility for other benefits. Individuals considering spending down to qualify for Medicaid LTSS should consult with elder law attorneys or financial advisors familiar with Medicaid planning in their state to ensure compliance with all regulations and to develop an appropriate strategy for their specific situation.” *** *** ARTIFICIAL
SPEND DOWN. For more on the damage done by widespread practice of
qualifying for Medicaid by purchasing exempt assets, read this “Paragon
Prognosis” I wrote for the
LTC BULLET: UNDERSTANDING MEDICAID SPEND DOWN LTC Comment: The Social Security Act says Medicaid’s role in long-term care (LTC) is “to furnish (1) medical assistance on behalf … of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such … individuals attain or retain capability for independence or self-care … .” In plainer language, Medicaid’s LTC job is to provide medical assistance, rehabilitation and related services to individuals “ … whose income and resources are insufficient to meet the costs of necessary medical services … .” Note there is no requirement, as so often claimed, that people become “destitute” or “impoverished” to qualify. Anyone is eligible for Medicaid’s help who faces private medical or LTC expenses, but has too little income and resources to pay for them. How does Medicaid decide whether an applicant for LTC benefits has insufficient income and resources to pay privately? On the income side, most state Medicaid programs (34) require applicant/recipients (ARs) to prove that they spent down nearly all of their income for private medical or LTC expenses. Other states cap total income but permit higher-income applicants to divert their excess income into special trusts. Under either system there is no upper limit on how high starting income can be as long as documented private medical and LTC expenditures suffice or an income diversion trust is used. A good rule of thumb is that income below the cost of a nursing home, $8,000 or $9,000 per month, fairly high income, is not disqualifying. Medicaid’s procedure to determine whether ARs have insufficient resources to pay privately for care is entirely different. Unlike for income, Medicaid requires no evidence that people spend down their resources for private medical or LTC expenses. They can expend their wealth on anything they wish, including products or services that Medicaid considers exempt from its very low resource limit, usually only $2,000. Because most large assets seniors own are exempt, such as home equity, a business, a vehicle, IRAs in payout, etc., and remaining countable assets are easily convertible to noncountable by purchasing exempt resources, such as home improvements, a new car, personal belongings or home furnishings, there is no upper limit on how much wealth Medicaid ARs can retain. For an estimate of how much value is diverted from private LTC spending into a Medicaid expenditure by means of purchasing exempt assets, see “Medicaid’s $100+ Billion Leak.” Thus, despite its reputation as a program for the poor that requires spend down into impoverishment, Medicaid actually places no upper limit on how much income and resources ARs may retain. Bottom line, financial eligibility for Medicaid LTC benefits is not difficult to achieve. Beyond their income, which is Medicaid’s co-insurance, consumers have little “skin in the game.” This reality has terrible consequences for America’s foundering LTC services and financing system. Financial Consequences Nearly six decades of easy access to Medicaid LTC with the added benefit of preserving wealth created a moral hazard. It enabled the public’s denial of LTC risk and cost. Fewer people, in fact hardly any, plan early to save, invest or insure for LTC. Why bother when Medicaid has bailed out generations of elders when they face catastrophic LTC costs? As a result, we see spiraling dependency on Medicaid, with generations of adult children ignoring LTC planning as their inheritances are protected by Medicaid’s paying for their parents’ LTC. Excessive reliance on government funding and regulation delivered a dysfunctional LTC system based on too much central planning. Heavy regulation by the Centers for Medicare and Medicaid Services (CMS) hamstrings LTC providers. It demands Ritz Carlton care but pays only Motel 6 rates. Government micromanagement, such as a recent staffing mandate without commensurate compensation, deflates morale as it exacerbates providers’ dilemma, pinched between the rock of inadequate reimbursement and the hard place of mandatory quality. Lacking market incentives to experiment with new care strategies, LTC providers offer only those care options for which the government will pay. Access and Quality Consequences Because Medicaid LTC benefits are so easy to qualify for financially, too many people rely on the program for its most expensive service. State and federal Medicaid LTC budgets are spread so thin and program resources are so limited that reimbursement levels for LTC providers must be kept notoriously low, often less than the cost of delivering the care. Low wages cause caregiver shortages. Care access and quality suffer, especially for the neediest recipients. The financial strain on institutional and home care providers reduces profitability and discourages private investment in LTC. Medicaid’s long-standing institutional, i.e. nursing home, bias lingers despite decades of efforts to rebalance toward home care for two reasons. The public’s aversion to nursing home care helps restrain growing Medicaid expenditures. The hope that home care would save money did not prove out because too many people who receive home care end up needing a nursing home eventually anyway. Long waiting lists, upwards of 700,000, for Medicaid’s waivered home and community-based services (HCBS) further exacerbate access problems. Desire to avoid Medicaid’s low cost care of uncertain quality leads to excessive reliance on unpaid caregivers, severely stressing families and friends financially and emotionally. Ethical Consequences Perhaps most tragic of all is the structural LTC racism Medicaid causes. The program’s deficient access and quality is well known. Everyone who depends on the program suffers. But some suffer more than others. Marginalized, socioeconomic groups, including racial minorities, are quickly impoverished by Medicaid’s financial eligibility rules. They are already Medicaid dependents when they seek nursing home care or HCBS. More affluent people, who also qualify easily as explained above, are able to pay privately for a while before applying for Medicaid. That is important because revenue-starved LTC providers are desperate to attract market-rate private payers who contribute half again as much revenue per person as Medicaid provides. What this means is that more affluent people who qualify for Medicaid have first access to the best care Medicaid provides. They tend to live in nicer neighborhoods where the best nursing homes and home care providers are found. LTC providers that are less dependent on Medicaid’s low reimbursement rates and that have greater philanthropic funding and higher Medicare and private pay census are known to provide the best care. Lacking the “key money” to buy their way into such care providers and tending to live in neighborhoods with fewer of the best providers, the poor, including racial minorities, have access only to the least desirable Medicaid-financed care. For these reasons, a large and growing academic literature condemns Medicaid as a primary cause of structural LTC racism. Bottom Line By funding most LTC, not only for the poor but for the middle class and affluent as well, Medicaid is the direct cause of most of America’s LTC problems. By covering everyone who is unable to pay privately for LTC, the program crowded out personal planning and responsibility, became the dominant payor for LTC, is unable to pay adequately to ensure good access and high quality, and favored the affluent over the needy whom it should have benefited most. To improve LTC,
Medicaid’s scarce resources should be re-directed to the needy and away
from others who can and should pay for their own care. That policy change
will quickly incentivize those who are able to plan early and take
personal responsibility for LTC risk and cost. For more detailed analysis
and a full explanation of how to achieve these goals see, the |