3. PROMOTING EQUITY AND AFFORDABILITY

Medicaid is already too expensive for New York’s existing tax base. Alternative sources of LTC financing are desperately needed. There are four alternative sources of funding for LTC that could relieve a substantial portion of the budgetary pressure on the state’s Medicaid program.

Asset Spend Down

As explained in the section on Medicaid LTC eligibility, New York does little to encourage people to spend their own money on LTC. The state has adopted Medicaid coverage and eligibility standards at the high end of what federal law allows. It covers most optional Medicaid services, making the welfare program as generous as many—and more generous than some—private sector health insurance programs. It exempts $750,000 worth of home equity, $250,000 more than the federal minimum. The state’s minimum CSRA of $74,820 is $52,908 higher that the federal minimum. Unlike nearly every other state, New York allows spouses to refuse without penalty to provide mandatory support that would offset Medicaid’s cost.

New York could send an important message to consumers about the importance of LTC planning by adopting the stricter eligibility and coverage limits allowable under federal law. But federal maintenance of effort requirements in the American Reinvestment and Recovery Act and the Patient Protection and Affordable Care Act penalize states for reducing eligibility and coverage. Furthermore, federal Medicaid rules do not allow states to target benefits to the truly needy. A large home equity protection and other resource exemptions are locked into federal law and regulations.

Thus, few choices exist for states to get out from under the federal thumb. In 2008, Rhode Island sought and received a “global waiver” to trade a cap on FMAP for wider discretion in controlling costs, but that waiver restricts changes in eligibility standards.⁶² A Kaiser Family Foundation publication recently suggested that some states are so “financially strapped” by mandatory Medicaid spending “[t]hey could even thumb their nose at the law and cut eligibility, which would force the Obama administration to decide whether to cut all federal Medicaid funding to those states.”⁶³

New York State could discourage dependency on Medicaid for LTC by tightening income and asset eligibility limits. Even a 5 percent reduction in Medicaid LTC expenditures, achieved by diverting people from Medicaid to more and longer private payment for LTC, would save the program $620 million per year, with the savings divided according to the federal, state and local shares.

Estate Recovery

Since 1993, federal law has required states to recover Medicaid expenditures from the estates of deceased recipients.⁶⁴ The requirement serves a dual purpose: to relieve tax payers by generating non-tax revenue to support Medicaid and to encourage consumers to insure against the cost of LTC in order to avoid Medicaid dependency and future estate recovery. Unfortunately, most states, including New York, have neither enforced the estate recovery mandate aggressively nor publicized the requirement to the public. Consequently, consumer behavior has changed little and few people plan early enough to be able to pay privately for LTC.

As of 2004, a federal report found New York’s Medicaid estate recoveries came to only $30 million, or 0.5 percent of nursing home expenditures, which was much less than the national average of 0.8 percent.⁶⁵ For comparison, nearby states had recovery ratios varying from 0.1 percent in Pennsylvania to 2.0 percent in Massachusetts, with Vermont (0.4 percent), New Jersey (0.6 percent) and Connecticut (0.8 percent) in between.⁶⁶ More recent results for New York are not much better than 2004’s $30 million: $33 million for 2005, $38 million for 2006, and $35 million for 2007.⁶⁷

But what if New York recovered from estates at the average national rate of 0.8 percent? Or even at the rate achieved by the country’s most successful state, Oregon, which recovered 5.8 percent of the cost of its Medicaid nursing home program in 2004? Merely by attaining the average national estate recovery rate, New York would generate an additional $15 million, based on the latest collection data. If New York could equal the recovery rate of Oregon, the most successful state in this regard, it would generate $330 million in total recoveries. While the total recovery would include local, state and federal shares, the local and state shares can be leveraged back up to the total by reinvesting it in Medicaid and receiving the federal share again.

Based on the recommendations of his Medicaid Redesign Team, Governor Cuomo’s amended 2011-12 budget seeks to authorize the Health Department’s Office of Medicaid Inspector General (OMIG) to assume statewide responsibility for pursuing estate recoveries.⁶⁸ The Redesign Team said OMIG was better staffed and more capable of handling this task than county administrators, who “have little, if any, financial incentive to pursue estate recoveries, and thus have not done so aggressively.”⁶⁹ The Redesign Team estimated that this change would generate total savings of $78 million in 2011-12, increasing to $104 million in later years, with half the annual savings flowing to the state. However, this may be conservative at barely one-third of the savings that could result from replicating Oregon’s recover rate, as noted.

Home Equity Conversion

If New Yorkers were required to use home equity to fund LTC before getting help from the government, Medicaid expenditures in the state would decline considerably. While New York State’s home ownership rate (53 percent) is much lower than the national average (66.2 percent),⁷⁰ the median home value in the state ($258,500) is much higher than for the USA ($179,900).⁷¹ Furthermore, in the New York City metro area, which consumes a disproportionate share of Medicaid LTC expenditures, home values are much higher still, with a median value of $362,000, although the home ownership rate is much lower, only 30 percent in New York City proper.⁷²

People sixty-two or older can access their home equity through reverse mortgages without having to leave their homes or make monthly payments.⁷³ Supplemental income from reverse mortgages could enable many New Yorkers to pay privately for services now routinely covered by Medicaid. By purchasing home care or household modifications such as wheelchair ramps with the proceeds of a reverse mortgage, many New Yorkers could offset the cost of LTC expenses.⁷⁴

New York Medicaid exempts up to $750,000 worth of home equity, nearly three times the median home value in the state and more than double the median value of homes in New York City. Yet, even this generous exemption is not routinely enforced by all New York counties.⁷⁵

New York’s meager efforts at estate recovery ensure that most home equity retained by Medicaid recipients disappears into inheritances instead of helping to fund the program. Furthermore, most home equity held by seniors is gone by the time they apply for Medicaid. Eligibility workers told us families often execute a transfer of assets—including the home—from the older to the younger generation as a matter of course, regardless of whether it is consciously done to escape Medicaid’s five year look back. Nationally, over 80 percent of seniors own their homes and more than 70 percent of these are free of mortgage debt.⁷⁶ Yet, only 14 percent of Medicaid recipients owned homes according to a 1989 GAO study, the most recent data available on this point.⁷⁷

Measures Medicaid could take to encourage the use of home equity funding of LTC include lowering the home-equity exemption to the federal minimum of $500,000, seeking waivers to permit a much lower home-equity exemption and a longer transfer of assets look back period for real estate. With stronger measures like these in place, more New Yorkers would have an incentive to retain ownership of their homes; to use reverse mortgages to purchase home care in the private market or to supplement their incomes to afford private LTC insurance; and to become less dependent on Medicaid.

By bringing home equity conversion, a huge new source of private funding for LTC, into the system, such measures as these could also reduce the number of New Yorkers who are entitled to both Medicaid and Medicare benefits, the so-called dual eligibles. By using their home equity to purchase LTC, many could avoid or at least delay dependency on Medicaid.

If home equity were at risk, recipients would also have a much larger incentive to purchase private LTC insurance when they are still young enough, healthy enough, and affluent enough to afford it. While constituting just 15 percent of Medicaid enrollees, the dual eligibles account for 40 percent of Medicaid spending.⁷⁸ Reducing duals even by 1 percent by ensuring that all aging New Yorkers utilize home equity before relying on Medicaid could save nearly $1.3 billion per year.

LTC Insurance

A fourth source of private financing that could relieve the financial pressure on Medicaid is private LTC insurance. New York was an early adopter of the Long-Term Care Partnership program, a plan to promote the purchase of LTC insurance by forgiving Medicaid spend-down entirely (the original total asset approach) or more recently, by a dollar-for-dollar approach that reduces spend-down by an amount equal to the value of insurance purchased and actually used. New York also offers a 20 percent state income tax credit for the purchase of private LTC insurance, which is tantamount to a one-fifth discount on LTC insurance premiums for people with high enough incomes to qualify.

Despite this, LTC insurance coverage has not expanded significantly. The number of “insured lives” receiving LTC in New York rose from 408,167 in 2007 to 422,758 in 2008, an increase of 3.6 percent.⁷⁹ The product’s market penetration is only 6.7 percent.⁸⁰ LTC insurance agents we interviewed for this study on November 11, 2010 said their market is basically flat. Less than ten companies sell LTC products in New York State, and the number of agents who specialize in them has declined. Agents also worry that mandates to improve LTC Partnership products, such as requiring 5 percent annual benefit increases, make the product less affordable.

The state Legislature has considered an LTC Compact proposal under which citizens could pledge a portion of their savings in exchange for Medicaid LTC eligibility without further spend down.⁸¹ A limited LTC Compact pilot project with 5,000 slots was recently passed into law and is pending implementation.⁸²

But the single biggest reason for the poor performance of the LTC insurance market in New York State is articulated clearly in the state’s consumer booklet on the LTC Partnership program:

For many people, the Medicaid program has become their long-term care “safety net” and the primary source of funding for these expenses. In fact, more than 80 percent of nursing home days in New York State are paid by Medicaid…As the population continues to age and older New Yorkers require more care, funding of Medicaid becomes an urgent matter. The assumption of personal responsibility, mainly through the use of long-term care insurance, will help maintain Medicaid benefits for those in greatest need.⁸³

Between two-thirds and 90 percent of the private LTC insurance market is crowded out by the availability of Medicaid financed LTC.⁸⁴ As long as New York Medicaid makes home care and nursing-home care readily available to most people without significant financial risk, LTC insurance is bound to remain a niche product. The problem, however, is not simply that most New Yorkers know that Medicaid will pay and therefore do not bother to save or insure for LTC, but that most people don’t think about LTC until it is too late for them to buy a medically underwritten insurance product. An AARP study of people aged fifty and over found that, when specifically asked, 67 percent doubted they could pay for LTC themselves and 88 percent supported increased state spending for HCBS.⁸⁵

If New York removes the perverse incentives that discourage responsible LTC planning, it is reasonable to expect that between 5 percent ($607 million) and 10 percent ($1.24 billion) of New York’s annual Medicaid LTC expenditures could be picked up over time by private insurance.

Among the Medicaid Redesign team proposals embraced by Governor Cuomo is a series of steps for expanding the Partnership for Long Term Care Insurance Program and other LTC insurance products. Changes would include a doubling, from 20 percent to 40 percent, of the income tax credit for the purchase of tax-qualified LTC insurance policies, a plan option allowing for lower minimum benefits more closely tailored to actual experience, and more options for financing LTC insurance through, for example, allowing proceeds of reverse mortgages to be used for purchasing Partnership products.⁸⁶

4.  FINDINGS & RECOMMENDATIONS

Our recommendations are divided into two categories: (1) measures New York Medicaid could take immediately under existing federal law to reduce the impact of impending budget shortfalls; and (2) measures the state could take over time to solve the problem of LTC financing by seeking a “global waiver.”

Immediate Reforms

Under existing federal law, New York could (1) tighten eligibility, (2) maximize non-tax revenue from estate recovery, (3) encourage the use of home equity as an LTC funding source, and (4) increase the purchase and use of private LTC insurance. Taken together these measures would encourage responsible LTC planning, and reduce the number of people who ultimately become dependent on Medicaid.

Eligibility

Although any reduction in eligibility standards since July 1, 2008 would violate “maintenance of effort” requirements in the soon-to-expire federal stimulus package and the Affordable Care Act, New York should consider them anyway. California has refused to implement critical mandatory provisions in prior federal laws without negative enforcement action by the federal government.⁸⁷ New York should similarly challenge the federal government to block its cost-control efforts. For example:

• Drop the home equity exemption to the federal minimum of $500,000 from the current level of $750,000.

• Apply transfer of assets restrictions and penalties to home- and community-based services as well as nursing home eligibility.

• Reduce the Community Spouse Resource Allowance to the federal minimum of $21,912 from the current level of $74,820.

• Reduce the Minimum Monthly Maintenance Needs Allowance to the federal minimum of $1,891 per month from the current level of $2,739.

• Pursue spouses who expropriate their husbands’ or wives’ resources through spousal refusal and use the authority in the “assignment of rights” required by federal law to recover the stolen property, as embodied in Governor Cuomo’s proposal to eliminate the spousal refusal option.⁸⁸

• Systematically study the income rules and resource exemptions guaranteed by federal law and regulations and ensure they are not allowed beyond minimum levels.

Estate Recovery

• Take over the estate-recovery program from the counties and either administer it aggressively with state employees or hire a private firm to do recoveries in exchange for a percentage of amounts collected, as proposed by Gov. Cuomo on the recommendation of his Medicaid Redesign Team.⁸⁹
• Conduct a study of successful estate-recovery practices in other states, especially Oregon, and implement proven methods and techniques.
• Disabuse the public of the notion that Medicaid LTC is free. Recipients who own exempt assets, including a home, must either pay for LTC out of pocket in advance or pay after the fact.

Home Equity Conversion

• Explain the benefits of paying privately for LTC to the public, including independence, control, access, and quality.
• Encourage the use of reverse mortgages to fund LTC in lieu of Medicaid by means of tax incentives or offsets on closing fees.
• Explain that home equity must be captured from recipients’ estates to repay Medicaid expenditures so that using the real property asset to avoid welfare and enjoy the benefits of being a private payer is advantageous.

LTC Insurance

• Publicize the fact that, as proposed in Governor Cuomo’s 2011-12 budget, New York Medicaid will enforce stricter eligibility- and estate-recovery rules in the future so that everyone who qualifies medically and can afford private LTC insurance should buy it.
• Explain to the public that Medicaid LTC benefits in the future are highly unlikely to be as generous in the past due to future demographic and financial pressures.

Permanent Solutions

The measures described above—which are allowable under federal law (except as restricted by the maintenance-of-effort rules)—will not solve New York’s LTC financing problem. They will help on the margin only if they are combined with a shift in the public’s understanding that individuals and families—not Medicaid—must be responsible for most LTC financing.

To solve New York’s LTC problem, the state will have to go much further than federal Medicaid rules currently allow. Public financial support for LTC must be limited to only the neediest. But to do that New York would have to drop out of Medicaid altogether or seek a “global waiver,” trading an FMAP cap for fuller authority to design and operate a LTC program for the truly needy. Without the traditional strings attached to Medicaid participation, New York could fund better LTC for fewer citizens who need the help the most by implementing the following guidelines.

Measures that could be taken to target public assistance for LTC to people who need it most and incentivize others to save, invest or insure for LTC:

• Transfer of Assets: Implement a ten year “look back period” for most assets⁹⁰ and a twenty-year look-back for real property transferred for less than fair market value.⁹¹ Eliminate the incentive to divest assets to qualify for public assistance.
• Public Relations: Impress upon aging New Yorkers that they cannot give their wealth away and then expect to receive publicly financed LTC.
• Home Equity: Radically reduce or eliminate the home equity exemption for receipt of public LTC benefits. Require the use of a reverse mortgage or sale of the real estate to fund LTC, thus reducing all property to a minimal level before receipt of public benefits.
• Home Equity Conversion: Once homeowners can no longer give away their home equity by transfers, with or without retaining life estates, the market for reverse mortgages to fund LTC will expand rapidly, creating jobs, generating tax revenue, and pouring much needed private financing into the service-delivery system.
• LTC Insurance: When aging New Yorkers can no longer ignore LTC risk and cost, avoid premiums for private insurance, wait to see if they ever need expensive LTC, and if they do, transfer the expense to taxpayers while retaining substantial wealth, they will finally begin to purchase private LTC insurance. This too will create jobs, generate tax revenue, and pump private financial oxygen into the revenue-starved service delivery system.
• Income Treatment: Once assets, particularly home equity, must be spent for care instead of transferred or sheltered, people will have more savings and reverse-mortgage income to fund their LTC privately. The state could then provide vouchers for care to close gaps between available income and costs of care for people genuinely needy.
• Family Responsibility: Once Medicaid stops incentivizing families to take early inheritances and place their loved ones on Medicaid, grown sons and daughters will pull together to support their parents and preserve their estates instead of fighting over the heritable wealth. Adult children’s self-interest would presumably impel them to help parents purchase LTC insurance in order to protect their inheritances and ensure access to quality care.

Taken together, these measures or similar initiatives would (1) encourage early and responsible LTC planning; (2) expand private investment to build a better and stronger home and community-based services infrastructure; (3) reduce institutional bias because people spending their own money will avoid entering nursing homes until it is medically necessary; (4) grow the reverse mortgage and LTC insurance markets thus creating jobs and tax revenue; (5) relieve taxpayers of the burden to fund most LTC through Medicaid; (6) ensure that scarce public resources go to people who need them most; (7) shut down the expensive practice of Medicaid planning; and (8) restore personal responsibility as the keystone for LTC planning.

CONCLUSION

Access to Medicaid funding for LTC in New York State has been too easy for too long. The combination of an aging population with greater care needs, a flagging economy, and dwindling federal support will soon bring Medicaid LTC spending up short. Instead of trying to provide a full range of LTC services to nearly everyone in the state, New York Medicaid will have to prioritize.

Cutting provider reimbursements further is not feasible while maintaining access and quality. Reducing services to all recipients is undesirable because it disproportionately hurts the poor. The preferable course is to funnel scarce Medicaid resources to the neediest people and encourage wealthier individuals to plan early and save, invest, or insure against the risks and costs of LTC.

Unfortunately, federal Medicaid maintenance-of-effort rules discourage limiting eligibility even for the well-to-do. When federal stimulus money runs out, New York will face “an immediate 20 percent reduction in funds . . . while Medicaid inflation and the rising number of recipients are increasing costs 8 percent a year.”⁹² Dramatic action over time is necessary to solve the problem, but certain urgent measures could mitigate the damage. Both should begin immediately.

Most of the problems discussed in this report spring from perversely counterproductive federal law and regulations. New York Medicaid staff have little choice but to implement and enforce those rules as written and interpreted by federal officials. That remains true as long as New York participates in the Medicaid program.

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APPENDIX: New York’s Medicaid Planning Industry

An internet search for “Medicaid planning in New York” returns over 300,000 hits, many of which are advertisements for firms that provide Medicaid planning services. Following are examples of Medicaid planners’ Internet ads:

From New York City planners:

“Medicaid will cover the cost of in-home LTC expenses as well as the cost of assisted living or nursing home facilities. Many people who need home care or nursing home care have the mistaken belief that if they have assets they can not qualify for Medicaid benefits. With proper legal advice from a [sic] Elder Law attorney and comprehensive Medicaid planning, even if you have assets, those assets can be preserved and protected and you can legally qualify for Medicaid benefits.”⁹³ (Emphasis added.)

“Is it possible to protect your assets and income, and still be eligible for Medicaid benefits? YES! [Emphasis in the original] With proper legal advice and comprehensive Medicaid Planning from a qualified Elder Law attorney, you or your family member or friend may be able to conserve your life’s savings and your income, and your home, for yourself and your Estate.”⁹⁴ (Emphasis added.)

“There are simple legal ways to limit exposure to nursing home bills and protect the assets you have worked so hard to obtain. To avoid or limit exposure to nursing home bills, it is important to be proactive. A five-year look-back period may be in place at the time you enter a nursing home, so waiting too long to transfer assets to your family or loved ones may make it impossible to protect your assets in the best manner possible.”⁹⁵ (Emphasis added.)

From Medicaid planners in other counties:

Orange County: “Protecting Assets and Ensuring Medicaid Eligibility: Our elder law attorneys are AARP-approved to help clients become eligible for Medicaid benefits.”⁹⁶ (Emphasis added.)

Nassau County: “Medicaid Planning Techniques for 2010 . . . A gift and promissory note program is designed to procure as much of the assets as possible of a senior about to go into a nursing home or already in a nursing home. . .The result of this type of planning will safeguard approximately fifty percent of the senior’s assets instead of all the senior’s assets being utilized to pay the nursing home expenses.”⁹⁷ (Emphasis added.)

The Ettinger Law Firm with offices in Albany County, Dutchess County, Saratoga County, Orange County, Richmond County, Rockland County, Westchester County: “With over 2,500 Medicaid applications filed, Ettinger Law Firm has the experience to help your family. For a free consultation at any of our eight New York locations, please contact us by telephone or email.”⁹⁸ (Emphasis added.)

The Ettinger Law Firm also publishes the “New York Elder Law Attorney Blog” at which readers can find articles on “Protecting Assets With Caregivers Agreements,” “Protecting Assets on the Nursing Home Doorstep: ‘Half-a-Loaf’ Planning or the ‘Gift and Loan’ Strategy,” “Using Medicaid Annuities to Protect Assets,” “The Medicaid Asset Protection Trust (MAPT) - Do’s and Don’ts,” “Spousal Refusal in New York - ‘Just Say No,’” and other Medicaid planning strategies.⁹⁹

Onondaga County and Monroe Counties: “Many counties have improperly created their own policies that vary from county to county. As a result, Medicaid applicants may be deprived of their legal rights and lose assets unnecessarily. . . . If you or a loved one is facing a catastrophic illness, please contact our Medicaid planning attorneys to schedule a free initial consultation. Our firm is available for home and hospital visits. You should never assume that it is too late. There is something you can do.”¹⁰⁰ (Emphasis added.)

Endnotes:

EndNotes

[1]Care is generally considered to be long-term when it exceeds 90 days.

[2]These cost figures are statewide New York averages.  Regional variations range from $207 to $500 per day for a semi-private nursing home room; from $1,600 to $8,205 per month for an assisted living facility; from $25 to $220 per day for adult day services; and from $17 to $31 per hour for a home health aide or $15 to $25 per hour for a homemaker.  Source: MetLife Mature Market Institute, “The 2010 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs,” October 2010, http://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-2010-market-survey-long-term-care-costs.pdf.

[3]Peter Kemper, Harriet L. Komisar, and Lisa Alecxih, “Long-Term Care Over an Uncertain Future: What Can Current Retirees Expect?,” Inquiry, Vol. 42, Winter 2005/2006, pps. 341-342, http://www.inquiryjournal.org/.

[4]Ari Houser, Wendy Fox-Grage, Mary Jo Gibson, “Across the States: Profiles of Long-Term Care and Independent Living,” eighth edition, 2009, AARP, Washington, DC, p. 228; http://assets.aarp.org/rgcenter/il/d19105_2008_ats.pdf.

[5]New York had 422,758 long-term care insured lives in 2008 according to Jesse Slome, “The 2010 Sourcebook for Long-Term Care Insurance Information,” American Association for Long-Term Care Insurance, Westlake Village, California, 2010, p. 14; http://www.aaltci.org/ltc-marketing/sourcebook/2009.php. The state had 6,313,521 people over the age of 50, the prime market for LTC insurance, according to Department of Health, “Vital Statistics of New York State 2008,” Table 1 - Estimated Population by Sex, Age and Region, New York State 2008, http://www.health.state.ny.us/nysdoh/vital_statistics/2008/table01.htm.The product’s market penetration is therefore only 6.7% percent.

[6]Stephen A. Moses, “So What If the Government Pays for Most Long-Term Care, 2009 Data Update,” Center for Long-Term Care Reform,” Seattle, Washington, January 26, 2011, http://www.centerltc.com/bullets/latest/903.htm.

[7]Ari Houser, Wendy Fox-Grage, Mary Jo Gibson, “Across the States: Profiles of Long-Term Care and Independent Living,” eighth edition, 2009, AARP, Washington, DC, p. 231; http://assets.aarp.org/rgcenter/il/d19105_2008_ats.pdf.

[8]Ibid.

[9]Kaiser Family Foundation, StateHealthFacts.org, extracted January 27, 2011, http://www.statehealthfacts.org/profileind.jsp?cmprgn=1&cat=4&rgn=34&ind=178&sub=47.

[10]Ari Houser, Wendy Fox-Grage, Mary Jo Gibson, “Across the States: Profiles of Long-Term Care and Independent Living,” eighth edition, 2009, AARP, Washington, DC, p.230; http://assets.aarp.org/rgcenter/il/d19105_2008_ats.pdf.

[11]Ibid.

[12]Ibid, p. 231.

[13]FMAP is the share of Medicaid expenses reimbursed by the federal government. With an FMAP of 50 percent, New York gets one dollar from the federal government for every dollar it puts up. With an FMAP of 62 percent, the state needs to put up only $.38 to get $1.00 from the federal Medicaid program.

[14]New York State 2010-11 Enacted Budget Financial Plan, August 20, 2010, p. 66; http://publications.budget.state.ny.us/budgetFP/2010-11FinancialPlanReport.pdf. The respective federal, state and local shares for 2010-11 to not reflect the 62/38 FMAP precisely, because the federal supplement was reduced somewhat for the January 1 to June 30, 2011 period.

[15]ELJAY, LLC, “A Report on Shortfalls in Medicaid Funding for Nursing Home Care,” for the American Health Care Association, December 2010; http://www.ahcancal.org/research_data/funding/Documents/2010%20Medicaid%20Shortfall%20Report.pdf.

[16]This break out of state, local and federal shares is based on current FMAP as reported in New York State 2010-11 Enacted Budget Financial Plan, August 20, 2010, p. 66; http://publications.budget.state.ny.us/budgetFP/2010-11FinancialPlanReport.pdf.

[17]New York State Family Caregiver Council, “Supporting and Strengthening

Caregivers in New York State,” November 2009, p. i; http://www.aging.ny.gov/Caregiving/Reports/InformalCaregivers/FamilyCaregiverCouncilReport.pdf.

[18]Source: Centers for Medicare and Medicaid Services, http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf, Tables 9 and 11.

[19]Stephen A. Moses, “LTC Bullet: So What If the Government Pays for Most LTC?, 2009 Data Update,” January 26, 2011, http://www.centerltc.com/bullets/latest/903.htm.

[20]Ari Houser, Wendy Fox-Grage, Mary Jo Gibson, “Across the States: Profiles of Long-Term Care and Independent Living,” eighth edition, 2009, AARP, Washington, DC, p. 228; http://assets.aarp.org/rgcenter/il/d19105_2008_ats.pdf.

[21]Ibid.

[22]New York State Office for the Aging, “Executive Summary: Sustaining Informal Caregivers,” funded by the Administration on Aging Performance Outcomes Measures Project, 2009; http://www.aging.ny.gov/Caregiving/Reports/InformalCaregivers/SustainingInformalCaregiversPOMPSurveyReport.pdf.

[23]Ari Houser, Wendy Fox-Grage, Mary Jo Gibson, “Across the States: Profiles of Long-Term Care and Independent Living,” eighth edition, 2009, AARP, Washington, DC, pps. 231, 232; http://assets.aarp.org/rgcenter/il/d19105_2008_ats.pdf.

[24]The “private insurance” referred to here “includes premiums paid to traditional managed care, self-insured health plans and indemnity plans” and not long-term care insurance. See “Quick Definitions for National Health Expenditure Accounts (NHEA) Categories,” http://www.cms.gov/NationalHealthExpendData/downloads/quickref.pdf.

[25]Ibid.

[26]New York Medicaid Director Donna Frescatore and her staff provided the data in this and the following paragraph.

[27]Ibid.

[28]Paul H. Keckley and Barbara Frink, “Medicaid Long-Term Care: The Ticking Time Bomb,” Deloitte Center for Health Solutions, Washington, DC, 2010, pps. 12-13; http://www.thefiscaltimes.com/Issues/Life-and-Money/2010/09/18/~/media/CB85A5D7ABD2426CA27C72195EFD3C76.ashx.

[29]The Omnibus Budget Reconciliation Act of 1987 (OBRA ‘87).

[30]Joshua M. Wiener and David G. Stevenson, “Repeal of the Boren Amendment: Implications for Quality of Care in Nursing Homes,” Number A-30 in Series, “New Federalism: Issues and Options for States,” Urban Institute, December 1, 1998, http://www.urban.org/url.cfm?ID=308020.

[31]“Eligibility bracket creep” is the gradual expansion of Medicaid LTC eligibility to include more and more people. According to a Hoover Institution report: “But over the years, Medicaid ltc has become more readily available to middle-income citizens due to policy mechanisms that allow applicants to ‘spend down’ their income and assets. Under this approach, certain assets, such as homes and cars, are not counted towards eligibility. People who could have otherwise paid for their long-term care have used estate planning, asset sheltering, and trusts to get Medicaid to foot the bill for them. It is fantasy to believe that Medicaid can continue to pick up all these tabs.” (Henry Olsen and Jon Flugstad, “The Forgotten Entitlements,” Hoover Institution, Policy Review No. 153, January 27, 2009; http://www.hoover.org/publications/policy-review/article/5519.)

[32]Robert B. Helms, “The Medicaid Commission Report: A Dissent,” American Enterprise Institute for Public Policy Research, Washington, D.C., No. 2, January 2007, http://www.aei.org/publications/filter.all,pubID.25434/pub_detail.asp.

[33]New York State 2010-11 Enacted Budget Financial Plan, August 20, 2010, p. 66; http://publications.budget.state.ny.us/budgetFP/2010-11FinancialPlanReport.pdf.

[34]Ravitch explains in a footnote that “These figures do not reflect the recent extension of the temporary FMAP increase through June 2011.”

[35]Richard Ravitch, “Lieutenant Governor’s Report on Controlling Increases in the Cost of New York Medicaid,” letter to Governor David Patterson, September 20, 2010, pps. 1-2; http://www.rockinst.org/pdf/budgetary_balance_ny/2010-09-20-LG_Medicaid.pdf.

[36]Richard Ravitch, “Washington and the Fiscal Crisis of the States,” Wall Street Journal, January 7, 2010; http://online.wsj.com/article/SB10001424052748704130904574644131951994574.html.

[37]Interview on November 8, 2010 with Assemblyman Steve Englebright, Chair, Committee on Tourism, Arts and Sports Development, former chair of the Committee on Aging.

[38]Interview with Deputy Commissioner for Long-Term Care Mark Kissinger on November 8, 2010.

[39]Vernon K. Smith, et al., “Hoping for Economic Recovery, Preparing for Health Reform: A Look at Medicaid Spending, Coverage and Policy Trends, Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2010 and 2011,” Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, September 2010, p. 75; http://www.kff.org/medicaid/upload/8105.pdf.

[40]“A Republican-controlled House is unlikely to extend the enhanced Medicaid funding for states in last year’s Recovery Act, the head of a nursing home trade association said Monday. A return to the initial federal share (known as FMAP) would be particularly painful for nursing homes and assisted living facilities, who rely on Medicaid to pay about two-thirds of their patients’ bills.” (Julian Pecquet, “Nursing home industry fears pending Medicaid cuts,” The Hill, November 8, 2010, http://thehill.com/blogs/healthwatch/medicaid/128161-nursing-home-industry-fears-pending-medicaid-cuts.)

[41]In roughly 15 states that have income caps, people can get around the income limit by setting up “Miller income trusts,” which were authorized by the Omnibus Budget Reconciliation Act of 1993 and which permit Medicaid applicants to divert income into the trust until they fall below the income cap and then draw income out of the trust to offset Medicaid’s cost for their care.

[42]Federal law (the Deficit Reduction Act of 2005) guarantees exempt home equity of at least $500,000, but New York opted for the maximum allowable exemption of $750,000 instead.

[43]“[T]hose with assets – which in most cases will include the value of their home – of more than £23,500 are given no help at all with care costs.” (No author cited,“Long-term care: get the best deal now: A new commission is to investigate the best way of funding care for our ageing population. But what steps can families take now?,” Telegraph.co.uk, July 21, 2010; http://www.telegraph.co.uk/finance/personalfinance/7902277/Long-term-care-get-the-best-deal-now.html.)

[44]“Property essential to self-support used in a trade or business is excluded from resources regardless of value or rate of return effective May 1, 1990.” (Social Security Administration, Program Operations Manual System (POMS), http://policy.ssa.gov/poms.nsf/lnx/0501130501.)

[45]“Based on a change in the regulations effective March 9, 2005, the resource exclusion for household goods and personal effects was changed to eliminate the dollar limit of the exclusion.” (Social Security Administration, Program Operations Manual System,POMS, “SI 01130.430: Household Goods, Personal Effects and Other Personal Property,” http://policy.ssa.gov/poms.nsf/lnx/0501130430.)

[46]“One automobile per household is excluded regardless of the value if it is used for transportation of the eligible individual/couple or a member of the eligible individual’s/couple’s household. ASSUMPTION: Assume the automobile is used for transportation, absent evidence to the contrary.” (Social Security Administration, Program Operations Manual System (POMS), “SI 01130.200: Automobiles and Other Vehicles Used for Transportation,” http://policy.ssa.gov/poms.nsf/lnx/0501130200. Emphasis in original.)

[47]“A burial space or agreement which represents the purchase of a burial space held for the burial of the individual, his or her spouse, or any other member of his or her immediate family is an excluded resource, regardless of value.” (Social Security Administration, Program Operations Manual System (POMS), “SI 01130.400: Burial Spaces,” http://policy.ssa.gov/poms.nsf/lnx/0501130400.)

[48]“[T]he FV [face value] of the following are not taken into account: burial insurance policies; and term insurance policies that do not generate a CSV [cash surrender value].” (Social Security Administration,Program Operations Manual System (POMS), “SI 01130.300: Life Insurance,” http://policy.ssa.gov/poms.nsf/lnx/0501130300.)

[49]“If an individual is eligible for periodic retirement benefits, he/she must apply for those benefits to be eligible for SSI. If he/she has a choice between periodic benefits and a lump sum, he/she must choose the periodic benefits.” (Social Security Administration,Program Operations Manual System (POMS), “SI 01120.210 Retirement Funds,” https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120210.)

[50]Before the Medicare Catastrophic Coverage Act of 1988 (MCCA ‘88) created spousal impoverishment protections, wives or husbands of institutionalized Medicaid recipients were often left with incomes as low as the Supplemental Security Income monthly allowance, around $350 per month at the time. MCCA ‘88 ensured that community spouses could retain up to half the couple’s joint assets not to exceed $60,000 and up to $1,500 per month of income. These amounts were subject to state-specified minimums and set to increase with inflation so that the amounts in the following paragraph are currently in effect for New York.

[51]Interview November 8, 2010 with Wendy Butz, Director, Bureau of Medicaid/FHPlus Enrollment, Department of Health and Eileen Brennan, Chronic Care Specialist, CDHS, Department of Health, Albany, NY.

[52]Based on interviews by phone with Nicholas Settipani, a chronic care eligibility unit supervisor, on October 29, 2010 and in person with Suffolk County eligibility staff on November 9, 2010 in Ronkonkoma, NY and with Rensselaer County eligibility staff on November 10, 2010 in Troy, NY.

[53]A study prepared by the “New York Health Policy Research Center” and published in March 2009 found fewer “transfer of assets” cases were denied eligibility (in the 5 percent to 10 percent range) than were reported to us. This is probably because most of their review period (1998 to 2008) was before the DRA ‘05 became law in early 2006 and became fully effective in New York still later. DRA ‘05 closed off the “half-a-loaf” strategy and gave rise to the “reverse half-a-loaf” strategy which has radically increased the number of penalizable asset transfers. (See The New York Health Policy Research Center, “Assessing Asset Transfer for Medicaid Eligibility in New York State,” March 2009, Albany, New York; http://www.rockinst.org/pdf/health_care/2009-04-09-asset_transfer.pdf.)

[54]Typical of Medicaid planning advice published frequently in local newspapers throughout the state is Bonnie Kraham, “Protecting Your Future: Medicaid strategies to protect assets,” Times Herald-Record, November 28, 2010; http://www.recordonline.com/apps/pbcs.dll/article?AID=/20101128/BIZ/11280315.

[55]The expression “long-term services and supports” is being used more often and “long-term care” less often by many writers. LTSS emphasizes the importance of home and community-based services, whereas some believe the LTC term is associated with a nursing home bias.

[56]AARP, “Long Term Services and Supports in New York: a Blueprint for Action, A Policy Report by AARP,” October 25, 2010, Washington, DC, p. 2.

[57]General Accounting Office, “The Elderly Should Benefit From Expanded Home Health Care But Increasing Those Services Will Not Insure Cost Reductions” (Dec. 7, 1982) p. 43, http://archive.gao.gov/f0102/120074.pdf.

[58]John F. Holahan and Joel W. Cohen, Medicaid: The Trade-off between Cost Containment and Access to Care, The Urban Institute Press, Washington, D.C., 1986, p. 106.

[59]Kenneth G. Manton, “The Dynamics of Population Aging: Demography and Policy Analysis,” The Milbank Quarterly, Vol. 69, No. 2, 1991, p. 322.

[60]Joshua M. Wiener and Wayne L. Anderson, “Follow the Money: Financing Home and Community-Based Services,” Pennsylvania Medicaid Policy Center, Pittsburgh, Pennsylvania, 2009, p. 10, footnote omitted; http://www.pamedicaid.pitt.edu/documents/Homecare_rp_09.pdf.

[61]H. Stephen Kaye, Mitchell P. LaPlante, and Charlene Harrington, “Do Noninstitutional Long-Term Care Services Reduce Medicaid Spending?,” Health Affairs, Vol. 28, No. 1 (2009), p. 262, http://content.healthaffairs.org/cgi/reprint/28/1/262, gated.

[62]For details on Rhode Island’s “global waiver,” see Stephen A. Moses, “Doing LTC RIght,” Ocean State Policy Research Institute, Providence, Rhode Island, January 2010; http://www.centerltc.com/pubs/Doing_LTC_RIght.pdf.

[63]Marilyn Werber Serafini and Julie Appleby, “States May Face Showdown With Feds Over Cutting Medicaid Rolls,” Kaiser Health News, January 20, 2011; http://www.kaiserhealthnews.org/Stories/2011/January/28/medicaid-maintenance-of-effort.aspx.

[64]Omnibus Budget Reconciliation Act of 1993.

[65]U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging and Long-Term Care Policy, “Medicaid Estate Recovery Collections,” Policy Brief No. 6, September 2005, pps. 1-2; http://aspe.hhs.gov/daltcp/Reports/estreccol.pdf.

[66]Why is New York’s recovery rate so low? In New York, counties are responsible for Medicaid estate recoveries. In conversation, county employees reported that they have no incentive to pursue collections aggressively, because they do not share in the recoveries. A New York City elder law attorney we interviewed said “I have not had any estate recovery cases in a long time. I haven’t heard others talking about recovery either. It looks like the [Medicaid] agency has made a decision not to do it.” Centralizing the estate recovery function, learning and applying best practices in other states including Oregon, and publicizing the inevitability of paying for LTC either on the front end with more asset spend down or on the back end with higher estate recoveries, could generate significant new non-tax revenue and encourage future generations to prepare to avoid dependency on Medicaid.

[67]Data on Medicaid estate recoveries for 2005-2007 were provided by the state Health Department office of Medicaid Director..

[68]Medicaid Rdesign Team, “Proposals Approved by the NYC Medicaid Redesign Team,” Feb. 24, 2011, Proposal 102, http://www.health.state.ny.us/health_care/medicaid/redesign/

[69]Medicaid Redesign Team, “Descriptions of Recommendations,” p. 118, http://www.health.state.ny.us/health_care/medicaid/redesign/

[70]U.S. Census, “State and County QuickFacts,” New York, http://quickfacts.census.gov/qfd/states/36000.html.

[71]New York Home Prices and Home Values, Zillow Home Value Index, November 5, 2010, http://www.zillow.com/local-info/NY-home-value/r_43/.

[72]New York City Department of Housing Preservation & Development, “A Message from Mayor Bloomberg,” retrieved January 31, 2011 from http://www.nyc.gov/html/hpd/html/buyers/guide.shtml.

[73]For more information about reverse mortgages, see www.reversemortgage.org, the National Reverse Mortgage Lenders Association’s (NRMLA’s) website and Donald L. Redfoot, “In Brief: Reverse Mortgages: Niche Product or Mainstream Solution?,” AARP Public Policy Institute Paper #2007-22, Washington, DC, December 2007, http://assets.aarp.org/rgcenter/consume/inb999_revmortgage.pdf.

[74]Barbara R. Stucki, “Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action,” The National Council on the Aging, January 2005, http://www.reversemortgagetimes.org/guides/reverselongterm.pdf.

[75]State eligibility policy staff, eligibility workers in Suffolk and Renssalaer Counties, and a Medicaid planning attorney all told us that New York does not enforce the $750,000 limit on home equity.

[76]“The vast majority of Americans age 65 and older in 2004 (82 percent) are homeowners (Callis and Cavanaugh 2004). Over half the net worth of seniors is currently illiquid in their homes and other real estate (Orzechowski and Sepielli 2003). [p. 1]

“Based on the Health and Retirement Study, in 2000 there were 27.5 million elder households with at least one resident age 62 or older. A high proportion (21.1 million) of these households (78 percent) were homeowners (Figure 3.2). About 74 percent owned their homes free and clear of any mortgages. In aggregate, elder households have accumulated over $2 trillion in home equity. [p. 26]

(Barbara R. Stucki, “Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action,” The National Council on the Aging, January 2005,

http://www.reversemortgagetimes.org/guides/reverselongterm.pdf.)

[77]General Accounting Office, “Medicaid: Recoveries from Nursing Home Residents’ Estates Could Offset Program Costs,” GAO/HRD-89-56, March 1989, p. 4; http://archive.gao.gov/d15t6/138099.pdf.

[78]Richard Ravitch, “Lieutenant Governor’s Report on Controlling Increases in the Cost of New York Medicaid,” letter to Governor David Patterson, September 20, 2010, p. 8; http://www.rockinst.org/pdf/budgetary_balance_ny/2010-09-20-LG_Medicaid.pdf.

[79]Jesse Slome, “The 2010 Sourcebook for Long-Term Care Insurance Information,” American Association for Long-Term Care Insurance, Westlake Village, California, 2010, p. 14; http://www.aaltci.org/ltc-marketing/sourcebook/2009.php.

[80]New York State has 6,313,521 people over the age of fifty, the prime market for LTC insurance.

[81]The Long-Term Care Compact proposal was developed and promoted primarily by New York’s elder law bar, including leading Medicaid planners. A full discussion of the LTC Compact idea is beyond the scope of this report but is available in Stephen A. Moses, “The New York Long-Term Care Compact Proposal: Update, Analysis and Recommendations,” Center for Long-Term Care Reform, Seattle, Washington, July 27, 2007; http://www.centerltc.com/pubs/NY_Compact.pdf.

[82]Chapter 58, Laws of 2010, Part C, “Reform Medicaid reimbursement for Long Term Care (LTC),” S. 6608--B, A9708--C, 6/30/2010; http://www.osc.state.ny.us/reports/budget/2011/2010-11enactedbudgetreport.pdf, p. 59.

[83]New York State Department of Health, NYS Partnership for Long-Term Care, “Affordable Financing for Long-Term Care: Consumer Booklet,” February 2006, Albany, New York, p. 5, footnotes omitted; http://www.nyspltc.org/docs/ltcnewbooklet.pdf.

[84]Low market penetration for private long-term care insurance in a state with generous access to Medicaid-funded LTC benefits comports with research findings that confirm the impact of Medicaid “crowd out.” For example: “We examine the interaction of the public Medicaid program with the private market for long-term care insurance and estimate that Medicaid can explain the lack of private insurance purchases for at least two-thirds and as much as 90 percent of the wealth distribution, even if comprehensive, actuarially fair private policies were available.” (Jeffrey R. Brown and Amy Finkelstein, “The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market,” National Bureau of Economic Research, December 2004, cited from the paper’s “Abstract,” http://www.nber.org/~afinkels/papers/Brown_Finkelstein_Medicaid_Dec_04.pdf), emphasis added.

[85]Cassandra Burton and Katherine Bridges, “Long-Term Care: An AARP Survey of New York Residents Age 50+,” AARP Knowledge Management, Washington, DC, March 2007, p. 2; http://assets.aarp.org/rgcenter/il/ny_ltc_2007.pdf.

[86] Medicaid Redesign Team, “Proposals Approved by the NYC Medicaid Redesign Team,” Feb. 24, 2011, Proposal 1462, http://www.health.state.ny.us/health_care/medicaid/redesign/

[87]For examples, see Stephen A. Moses, “Medi-Cal Long-Term Care: Safety Net or Hammock?” forthcoming from the Pacific Research Institute.

[88] Medicaid Redesign Team, “Proposals Approved by the NYC Medicaid Redesign Team,” Feb. 24, 2011, Proposal 18, http://www.health.state.ny.us/health_care/medicaid/redesign/

[89]Medicaid Redesign Team, “Proposals Approved by the NYC Medicaid Redesign Team,” Feb. 24, 2011, Proposal 102, http://www.health.state.ny.us/health_care/medicaid/redesign/

[90]Germany currently imposes a ten-year look back period for asset transfers and seeks recovery from the donees to offset welfare-based long-term care expenses.

[91]Transfers of real property are relatively easy to track because they are recorded in public records.

[92]Michael Gormley, “NY governor candidates seek Medicaid spending trim,” Buffalo News.com, October 25, 2010, http://www.buffalonews.com/wire-feeds/24-hour-world-news/article230961.ece.

[93]New York Elder Law Attorneys, contact Robbins & Associates, P.C., One Grand Central Place, 60 East 42nd Street, 46th Floor, New York, NY, 10165, phone: (212) 808-0444; http://www.jarpc.net/Practice-Areas/Health-Care-Issues.aspx#Healthcare2, retrieved October 22, 2010.

[94]Lamson & Cutner, P.C., 9 East 40th Street, New York, NY, 10016, http://www.elder-law-cutner.com/Medicaid-Benefits-Planning.html, retrieved October 22, 2010.

[95]Connors and Sullivan Attorneys at Law, PLLC represents clients throughout the five boroughs of New York City, including Brooklyn, Queens, Manhattan, The Bronx and Staten Island, including such neighborhoods as Bay Ridge, Park Slope, Astoria, Middle Village and Bayside. Retrieved October 22, 2010 from http://www.connorsandsullivan.com/PracticeAreas/Medicaid-Planning-Avoiding.asp.

[96]Jacobowitz & Gubits, LLP, 158 Orange Avenue, Walden, NY, 12586-2029, phone: 845-764-4285, retrieved October 22, 2010 from http://www.jacobowitz.com/Practice-Areas/Medicaid-Guardianships.shtml.

[97]Law Offices of Elliot S. Schlissel, Wills, Trust & Estate Attorneys, 479 Merrick Road, Lynbrook, NY 11563, in the five boroughs: 718.350.2802, in Nassau County: 516.561.6645. Retrieved October 22, 2010 from http://www.nywillsandtrustslawyer.com/medicaid-planning-techniques.php.

[98]Ettinger Law Firm, retrieved October 22, 2010 from http://www.trustlaw.com/.

[99]Retrieved October 22, 2010 from http://www.newyorkelderlawattorneyblog.com/medicaid-planning/.

[100]Syracuse Office, Koldin Law Center, P.C., 6661 Kirkville Road, P.O. Box 279, East Syracuse, NY 13057, Tel: 315-463-4032 and Rochester Office Koldin Law Center, P.C., 120 Corporate Woods, Suite 130 Rochester, NY 14623, Tel: 585-292-0090. Retrieved November 24, 2010 from http://koldin.com/estate_planning_medicaid/medicaid