EXECUTIVE SUMMARY

 

New York’s expensive Medicaid program provides generous long-term care benefits to a large number of recipients. Although Medicaid eligibility is means-tested, with limits on both income and assets, the program nevertheless pays for most professional long-term care services in the state.

 

Lenient and elastic eligibility criteria—partly mandated by the federal government and partly voluntary by the state—have placed most of the burden of long-term care financing on Medicaid. Ease of access to Medicaid after long-term care is needed has crowded out potential sources of private financing such as asset spend down, home equity conversion, estate recovery, and long-term care insurance.

 

Several of the Medicaid “redesign” proposals incorporated by Gov. Andrew Cuomo in his amended 2011-12 budget take important steps in the right direction, but much remains to be done to put long-term care policy in New York on an economically and financially sustainable footing. By targeting scarce Medicaid resources to New Yorkers in greatest need and by encouraging early and responsible long-term care planning by others, the state could save billions in county, state, and federal funds without sacrificing care, access, or quality.

 

OVERVIEW

 

The term long-term care (LTC) refers to the custodial and medical assistance required by elderly and disabled people who cannot fully care for themselves over an extended period of time.¹

 

In New York State, LTC is very expensive, whether provided in a nursing home ($336 per day compared to the national average of $205), in an assisted-living facility ($3,701 per month vs. $3,293 nationally), at an adult day-services facility ($99 per day vs. $67 nationally), or in one’s own home ($21 per hour for a home health aide; $19 per hour for a homemaker, same as the national average).²

 

Sixty-nine percent of people turning age sixty-five in the United States will eventually need at least some LTC, and 20 percent require five years or more.³ New York’s over-sixty-five population was 2.5 million or 13.2 percent in 2007, but it is expected to increase to 3.9 million or 20.1 percent in 2030. Even more alarming, New York’s over-eighty-five population, the cohort most likely to require LTC, may increase from 385,000 or 2 percent in 2007 to 3.2 percent in 2030.⁴ A larger aging population will likely require more LTC.

 

Nevertheless, despite the likely need for and high cost of LTC, most people do not save, invest, or insure against it. Only 6.7 percent of New Yorkers fifty years of age or older own private LTC insurance.⁵ The proportion of LTC expenditures paid out of pocket by individuals and families has plummeted since 1970 while the share paid by public programs, mostly Medicaid and Medicare, has soared both nationally and in New York State.⁶ By 2007, 72 percent of nursing home residents in New York relied on Medicaid as their primary payer compared to the national average of 64 percent.⁷ Only 15 percent relied on “other” funding sources, including out-of-pocket payments.⁸

 

This increasing dependency on struggling public programs, coupled with the aging of the baby boom generation and the lagging economy, ensures that funding LTC will become a crippling burden on New York State’s public finances. Nevertheless, New York continues to maximize Medicaid financing for a wide range of expensive LTC services. Consider:

• In 2008, the state spent about 43 percent of its $48 billion Medicaid budget on LTC compared to an average of nearly 34 percent for the whole country.⁹
• Medicaid LTC expenditures for older people and adults with disabilities topped $9.4 billion in 2007 or $491 per person, ranking New York number one compared to the national average of $213 per person.¹⁰
• New York also ranked number one in Medicaid home and community-based services expenditures for the elderly and disabled at $19,551 per person served compared to $9,459 on average in the United States.¹¹
• New York ranks number one in total nursing facility residents with 111,313 out of the country’s 1,440,358 total and second in total nursing home stays.¹²

 

Today, like most states, New York relies heavily on temporary supplemental federal Medicaid funding from the stimulus provided by the American Recovery and Reinvestment Act (ARRA) of 2009. The ARRA increased New York’s Federal Medical Assistance Percentage (FMAP),¹³ the share of Medicaid costs paid by the federal government, from 50 percent to 62 percent. According to New York’s current budget: “In 2010-11, the expected contributions are $14.2 billion from the State [27.0 percent], $31.1 billion from the Federal government [59.1 percent] and $7.3 billion from local governments [13.9 percent].”¹⁴ After June 30, 2011 when the supplemental matching funds expire and New York returns to its usual 50 percent FMAP, the State and local governments would have to put up an additional $4.8 billion to receive enough federal matching funds to support the same total expenditure of $52.6 billion.

 

Despite already high LTC expenditures, providers of all kinds insist they buckle under the weight of heavy Medicaid census and low reimbursement rates often at or below the cost of providing the care. That is the complaint we heard without exception in interviews with nursing home, assisted living and home health providers. One industry-sponsored study projected an average Medicaid nursing home reimbursement shortfall in New York State of $47.95 per bed day in 2010.¹⁵

 

Several major factors make funding Medicaid LTC at the same or even higher levels in the future increasingly difficult. Most New Yorkers qualify easily for Medicaid-financed LTC due to lenient and elastic income and asset eligibility limits. New York further invites excessive utilization of Medicaid benefits for LTC through generous spousal impoverishment protections and by allowing spousal refusal. Medicaid planning or artificial impoverishment to qualify for Medicaid is rampant in New York State. This report explains Medicaid LTC eligibility and provides examples of Medicaid planning.

 

New York Medicaid invests heavily in home and community-based services (HCBS). The state ranks number one in HCBS personal care for older and disabled adults at $24,268 per person compared to the national average of $9,666. People prefer home care over nursing home care and HCBS saves money according to many academics and policy makers. But confidence that buying more HCBS and less nursing-home care will save money has eroded as HCBS costs have exploded and the number of recipients increased. Policy makers should consider the financial impact of providing more services people prefer while allowing generous eligibility.

 

We estimate that by (1) targeting Medicaid’s scarce LTC resources to the neediest recipients by tightening eligibility criteria, (2) strongly enforcing federally mandated recovery of paid benefits from estates of deceased recipients, (3) requiring home equity conversion prior to Medicaid eligibility, and (4) encouraging the purchase of private LTC insurance, the New York Medicaid program could potentially achieve substantial savings from these four sources:

• Increased asset spend down: $620 million ($167.4 million state, $86.2 million local, and $366.4 million federal)¹⁶
• Stronger estate recovery: up to $330 million ($89.1 million state, $45.9 million local, and $195.0 million federal)
• Mandatory home equity conversion: $1.3 billion ($351.0 million state, $180.7 million local, and $768.3 million federal)
• LTC insurance: $607 million ($163.9 million state, $84.4 million local, and $358.7 million federal)

 

Note that the state/local/federal breakouts above are based on the current, highly subsidized FMAP. When New York’s federal match drops to 50 percent after June 2011, the state and local cost of Medicaid will increase sharply, as will the savings from pursuing these recommended policies.

 

This report demonstrates that government financing of LTC in New York State has encouraged individuals and families to ignore its potentially ruinous cost. The public’s denial of the financial risk associated with LTC is a rational response to a well-intentioned—but counterproductive—public policy. Most New Yorkers fail to plan adequately for their LTC expenses. Some are secure in the knowledge that, if such care becomes necessary, its costs can be successfully transferred to public programs such as Medicaid. Others simply do not worry about LTC risk and cost (because somebody or something else has always paid before). They may not know or ask who pays for LTC, but they do not feel personally at risk. New York should act before it is too late to wean aging citizens off Medicaid LTC dependency and to encourage responsible planning through private savings, investments, and insurance.

 

1. BACKGROUND

 

Families and friends provide upward of 80 percent of LTC in the United States. While usually provided for free, the estimated annual economic value of these voluntary services is $375 billion ($25 billion in New York State).¹⁷ In 2009, total national expenditure on formal LTC, provided either in a nursing home or at home, was $205.3 billion, most of which came directly from government sources such as Medicaid and Medicare.¹⁸

 

The percentage of national nursing home costs paid by Medicaid and Medicare increased by 26.4 percent between 1970 and 2009, while out-of-pocket costs paid by families and individuals decreased by 20.4 percent. Of the $68.3 billion spent on home health care in 2009, Medicare and Medicaid paid 79.2 percent and private insurance plans paid 7.3 percent. Only 8.8 percent of home-health-care costs were paid out-of-pocket by individuals and families in 2009.¹⁹

 

America’s LTC system has serious problems. Despite the expenditure of increasingly significant sums of public money, current distribution methods create inadequate funding at all levels of care. Consequently, access and quality are doubtful wherever care is provided. Despite the public’s preference for home care, the home- and community-based services infrastructure is underdeveloped, and the system perpetuates a bias toward nursing homes. Caregiver shortages are common. Tort liability and liability insurance rates are high, inflating overall service delivery costs. LTC insurance sales are low and declining in most places, which ensures ongoing high dependency on public funding. In short, the dominance of public funding reduces the personal financial risk of failing to prepare to pay for LTC.

 

LTC in New York

 

New York State faces all these challenges and more. People aged eighty-five and older—those most likely to need expensive LTC—made up 2 percent of the Empire State’s population in 2007, compared to 1.8 percent nationally. By 2030, these “old-old” people will constitute 3.2 percent of New York’s population, compared to 2.6 percent nationally, an increase of 62 percent in just twenty years.²⁰

 

Compared to the rest of the United States, a disproportionate share of older New Yorkers live in poverty²¹ and may need public assistance to fund their LTC. While families provide most of this care at no cost to the public,²² New Yorkers use a comparatively large amount of formal, paid, LTC services. The state ranks first in the nation in the number of its citizens living in nursing facilities, and second in home health aides (as a percentage of the over-sixty-five population).²³

 

Medicaid is the primary payer for 72 percent of nursing facility residents in New York State (compared with the national average of 64 percent). Medicare pays for another 13 percent. Only the remaining 15 percent of nursing facility residents in New York pay for their LTC from other sources including Veterans’ Administration benefits, their own money, or private insurance.²⁴ Medicaid is also the dominant funder of home care in New York, paying $356 per person—the highest nationally and nearly three times the national average of $127 per person.²⁵

 

Statewide, Medicaid LTC expenditures increased 26.4 percent from $9.8 billion in Calendar Year (CY) 2003 to $12.4 billion in CY ‘09, a rate of 4.0 percent per year. But statewide data mask fundamental regional differences in spending. Between 2003 and 2009, Medicaid expenditures on LTC in New York City accounted for roughly two-thirds of the program’s total spending statewide. During that same period, statewide Medicaid spending on LTC rose at an annual rate of 4 percent. Upstate, the rate of increase was just 2.1 percent annually. In the downstate region excluding New York City, it rose at 3.4 percent annually. But in New York City, annual Medicaid expenditures on LTC rose at 4.7 percent.²⁶

 

Aggregate data also mask vast differences in the amount and growth of Medicaid expenditures for specific kinds of LTC services. Nursing home expenditures in New York, for example, grew at a relatively mild 6.7 percent between 2003 and 2009 to $6.3 billion. During that same period, however, personal care increased 22.4 percent to $2.2 billion; home care services jumped 77.4 percent to $1.3 billion; managed LTC rose 174.4 percent to $1.2 billion; and, combined, Medicaid’s other home and community-based services programs, such as adult day care, long-term home health care, and the assisted-living program grew 50.3 percent to $1.2 billion.²⁷

 

New York State leads the country in spending on both Medicaid and LTC as a portion of its operating budget.²⁸ Even before the “age wave” spike in its elderly population that is expected over the next twenty years, the Empire State’s Medicaid expenditures on LTC far exceed private-pay spending for nursing homes and home health care and have grown much faster than inflation. These funds are increasingly and disproportionately spent on home- and community-based services in the downstate region, especially in New York City.

 

These facts and trends, especially the heavy dependency on Medicaid—a financially challenged federal welfare program—bode ill for New York’s fiscal future.

 

Medicaid’s Dominant Role

 

The first step toward understanding New York’s reliance on Medicaid funding of LTC is understanding how Medicaid became such a massive program in the first place.  Medicaid dominates LTC financing everywhere in the United States, not just in New York. What follows is a brief history of LTC financing in the United States.

 

A means-tested welfare program funded partially by the federal government and partially by states, Medicaid began offering nursing home care in 1965. Medical and financial eligibility criteria were lenient. For example, there were no mandatory transfer of assets restrictions, which today penalize gifting to reach Medicaid asset limits. There was no recovery of exempt assets from recipients’ estates as is mandatory under federal law today. Most frail or infirm people over age sixty-five could qualify easily. Cost plus reimbursements, which guaranteed profits, were very generous at the start in order to attract political support from LTC providers.

 

Several consequences followed rapidly from these conditions. Nursing homes became the setting for most LTC. Beds filled as fast as companies could build facilities, often with people who needed relatively minor care. The number of private payers shrank and the proportion of Medicaid recipients ballooned. A private market for home- and community-based services did not develop because Medicaid made nursing homes free, or at least radically subsidized their cost. Private insurance for LTC didn’t evolve for decades because Medicaid mitigated both its risk and its cost.

 

State and federal Medicaid expenditures on LTC skyrocketed immediately after the program’s enactment in 1965. Government tried to control costs by capping bed supply with “Certificates of Need,” which required official approval before a new nursing facility could be built. But capping supply only gave nursing homes an incentive to raise payment rates. So government capped rates, creating a differential between bare-bones Medicaid reimbursement levels and market rates.

 

By the 1980s, any nursing home willing to accept low Medicaid reimbursements could fill its beds almost without regard to the kind of care it provided. That led to high occupancy rates and serious quality problems. In response, the federal government mandated higher quality care in 1987,²⁹ but without offering higher reimbursement rates. State nursing home associations began suing for better rates under the Boren Amendment, a 1981 law that ensured at least minimal Medicaid nursing home reimbursement. The nursing homes won most of these suits. Repeal of the Boren Amendment in 1997 left no floor under Medicaid nursing home reimbursements and gave states greater flexibility to set rates.³⁰

 

While all this was going on during Medicaid’s first three decades, two other trends developed. First, Medicaid eligibility bracket creep and Medicaid estate planning made publicly financed LTC easier to get.³¹ Second, believing that home-based care was much cheaper per capita than nursing-home care, policy makers and legislators, encouraged by academics, pushed for more Medicaid-financed home- and community-based services.

 

Presently, home- and community-based services are the fastest growing Medicaid LTC expense. This is how the nation came to have a welfare-financed, nursing-home-based, LTC system (struggling to retrofit more desirable home-care services) in the wealthiest country in the world.

 

Medicaid=More

 

New York State Medicaid experienced all these same incentives, trends, and pressures, on a grander scale. In Albany, people often joke that “Medicaid” is a verb. If the federal government allows something to be charged to Medicaid, then policy makers in New York tend to “Medicaid it.” The Empire State did not just fund nursing-home care through Medicaid, it set its policies to take full advantage of federal matching funds.

 

Because New York is a relatively affluent state, its FMAP was set at the minimum allowable level of 50 percent for most of the program’s history. Poorer states received higher matching rates so that they would be better able to provide comparable benefits to their needy citizens. But it didn’t work out that way. Medicaid does not limit the amount of money states can invest to obtain federal matching funds, so richer states like New York can attract a disproportionate share of Medicaid money simply by putting up more state match monies. As a result, poorer states suchas Alabama, Louisiana, and Mississippi receive lower payments per-capita than wealthier states such as New York.³²

 

The 2009 federal stimulus bill, formally known as the American Recovery and Reinvestment Act, only enhanced New York’s ability to co-opt a disproportionate share of federal matching funds.³³ The state’s budget is heavily dependent on a further extension of such largesse. Former Lt. Governor Richard Ravitch summarized the problem:

 

In State fiscal year 2009-2010, Medicaid spending—State, federal, and local—totaled over $50 billion, the equivalent of more than one-third of the State’s All Funds budget. Between 2009-10 and 2013-14, this total is expected to grow by 27 percent to $63.5 billion, an average annual increase of nearly seven percent. During the same period, the State’s share of Medicaid costs will increase much faster—by 71 percent, an average annual increase of nearly 18 percent—because of the expiration of federal stimulus aid.³⁴ In 2014, because of the recently enacted federal health care reform law, increased numbers of New Yorkers are projected to enroll in Medicaid, further increasing state costs.³⁵

 

Ravitch elaborated in a Wall Street Journal op-ed: “The net result is this: The federal stimulus has led states to increase overall spending in these core areas, which in effect has only raised the height of the cliff from which state spending will fall if stimulus funds evaporate.”³⁶

 

Elected and appointed officials we interviewed for this study echoed the Lt. Governor’s concerns. For example, former Assembly Aging Committee Chairman Steve Englebright said:

           

If we don’t do long-term care insurance for essentially everybody who is entering working years and youthful enough to buy it inexpensively, we will have missed the only opportunity that I see for having an answer to the long-term care needs of the baby boomers. If we don’t have an answer based on their paying their own way, then all our states will be bankrupt.³⁷

 

Deputy Commissioner for Long-Term Care Mark Kissinger said:

 

The Feds just gave us more FMAP. Otherwise we would have had to make real cuts. People are budgeting here like the extra federal funds are not going away. There is a sense that it will all work out. We have had a Medicaid crisis for twenty years, but the wrecking ball has not hit. Education and Medicaid are pillars of the state budget, but Medicaid is crowding out everything.³⁸

 

Nevertheless, despite all the budget pressures facing New York, the state took “positive policy actions” in provider payments, benefit expansions, eligibility expansions, and LTC expansions for fiscal years 2010-11 according to the Kaiser Commission on Medicaid and the Uninsured.³⁹ After the national midterm election in November 2010, it appears unlikely that Congress will authorize any further extension beyond June 30, 2011 of the massive supplemental matching funds that have propped up New York’s Medicaid spending since October 2008.⁴⁰

 

Perverse Incentives

 

If Medicaid is a means-tested welfare program, and applicants must qualify based on low income and asset limits, how and why do so many New Yorkers qualify for its LTC benefits?

 

In fact, income almost never interferes with an individual’s ability to qualify for Medicaid LTC benefits anywhere in the United States.⁴¹ This is particularly true in New York which operates a “medically needy” income eligibility system under which medical expenses, including the cost of private nursing-home care, are deducted from an applicant’s income before eligibility is determined. It is not necessary to have an objectively low income to qualify for Medicaid LTC benefits in New York. It is only necessary to have a very low remaining income—$787 per month—after medical and LTC expenses are deducted from total income.

 

In terms of assets, individuals with more than $13,800 in cash or in resources convertible-to-cash are, at least in principle, ineligible to receive Medicaid benefits in New York State. Those seeking benefits, however, may spend down their assets to meet this requirement. Notably, Medicaid does not care how this spending down is done, so long as assets are not given away at less than fair market value for the purpose of qualifying for benefits. All manner of consumption is allowed, from taking a cruise vacation to remodeling the family home to buying home furnishings or purchasing a new car. 

 

Medicaid LTC recipients can also retain a long list of assets that are exempt under federal law. These include:

• A home and all contiguous property up to an equity value of$750,000⁴² as long as the Medicaid applicant/recipient (A/R) expresses a subjective “intent to return.” No medical verification of ability to return to the home is required. Compare England’s home equity exemption of only £23,500 or roughly $37,000.⁴³
• A business including the capital and cash flow of unlimited value.⁴⁴
• Household goods and personal belongings are totally exempt.⁴⁵
• One automobile of unlimited value if used for transportation of the Medicaid recipient or someone in the same household. “Assume the automobile is used for transportation, absent evidence to the contrary.”⁴⁶
• Prepaid burial plans for the Medicaid recipient and all immediate family members regardless of value.⁴⁷
• Unlimited term life insurance.⁴⁸ Why would an elderly person buy a large term life policy when the premium would nearly equal the benefit? Because assets transferred for value do not trigger an eligibility penalty, and there is no estate recovery because life insurance benefits pass outside an estate directly to the beneficiaries. This instantaneous “impoverishment” allows the elderly to qualify for Medicaid acute and LTC benefits.
• Individual retirement account assets and pensions in the applicant or recipient’s name are uncounted as long as the A/R is receiving periodic interest and principal payments.⁴⁹

 

Because of spousal impoverishment protections, married recipients enjoy even more generous eligibility standards.⁵⁰ The community spouse of an institutionalized Medicaid recipient may retain half the couple’s joint assets, not to exceed $109,500. This is the Community Spouse Resource Allowance (CSRA). New York allows the community spouse to retain a minimum of $74,820 even if the couple’s joint assets are less than double that amount. This allowance is much more generous than the minimum permitted by federal law of $21,912.

 

On the income side, if the community spouse’s personal income is below $2,739 per month, she or he can receive some of the Medicaid spouse’s income to bring her or him up to that level. This is the Minimum Monthly Maintenance Needs Allowance or MMMNA. New York adopted the maximum MMMNA allowed under federal law as its minimum. Joint assets and income in excess of these limits are supposed to be “spent down” for care to offset Medicaid’s costs.

 

Of course, neither the CSRA nor the MMMNA have any real meaning in New York because the state allows community spouses in most cases to refuse to support the Medicaid spouse at any level. (See the page 10 sidebar on “spousal refusal.”)

 

A complicating factor in figuring Medicaid LTC eligibility is that federal law requires states to apply an eligibility penalty when a Medicaid applicant has transferred assets for less than fair market value for the purpose of qualifying for assistance within five years of applying. The eligibility penalty is computed by dividing the amount of the applicable transfer by the average private monthly rate for a nursing home in the state.

 

So, for example, a $100,000 under-market transfer would trigger a ten-month eligibility penalty if the average cost of a nursing home were $10,000 per month. There are additional complications such as certain transfers to some qualified individuals that are exempt, but this is the basic rule that needs to be understood in order to comprehend asset transfer references in this report.

 

 

2. WHO IS LTC-ELIGIBLE IN NEW YORK?

 

To understand specifically how Medicaid LTC eligibility is determined in New York State, we interviewed eligibility-policy specialists in Albany as well as front line eligibility workers and supervisors in Suffolk and Rensselaer counties. The federal government establishes general requirements and guidelines for Medicaid eligibility which are interpreted and specified by the state, and then implemented by county workers.

 

Neither applicants for Medicaid LTC nor their representatives are required to come in for face-to-face eligibility interviews in New York. They can mail in their applications or have them filled out and submitted by a lawyer or some other private Medicaid application specialist. Although New York has implemented the federal maximum allowable home equity exemption of $750,000, the state has never denied eligibility to anyone based on that limit.⁵¹

 

Our interviews with county eligibility workers provided many examples of how the federal/state system of Medicaid LTC eligibility determination works in practice at the county level.⁵² Suffolk and Rensselaer differ demographically; the Long Island county is considerably wealthier than the upstate county. Below is a synopsis of the differences.

 

Eligibility in Suffolk:

•  Suffolk County workers said 75 percent of the nursing home applications they receive were completed by attorneys, paralegals, or agencies.
• Half of all new cases involve asset transfers most of which require calculation and application of an eligibility penalty as part of a reverse half-a-loaf strategy (see sidebar on next page).⁵³ Workers are seeing a lot more trusts than ever before, including “pooled trusts” used to disregard excess income and irrevocable trusts in 25 percent to 30 percent of nursing home cases. Because New York imposes no asset transfer penalty on home care cases, advisers recommend transferring assets immediately so that five years later, if nursing home care is needed, the transfers will be non-countable.
• Nearly every application in cases involving a community spouse comes in with spousal refusal. According to eligibility workers, approximately 35 percent of Suffolk County’s LTC applications—over 100 per month—involve a community spouse and 34 percent make use of spousal refusal.
• Around 75 percent of all LTC cases prepay burial expenses for the recipient and spouse in amounts averaging $8,000 to $10,000.
• Perhaps 35 percent of cases have transferred a home years before and retained the right to remain in the home until death (known as a “life estate”). This effectively eliminates the risk of estate recovery.
• Suffolk workers said they rarely see private LTC insurance and have seen “only one Long-Term Care Partnership policy.” There is “no reason for people to think about long-term care.”

 

Eligibility in Rensselaer:

• Upstate Rensselaer County has a less prosperous population than downstate Suffolk and eligibility workers’ responses reflected that difference.
• Only a quarter of applications, a third of the Suffolk rate, are done by lawyers or Medicaid application services that are sometimes run by former county workers.
• As in Suffolk, Rensselaer county LTC recipients transfer assets without penalty and get community Medicaid while the [five-year nursing home] look-back period is running out. Or they use the reverse half-a-loaf strategy with a promissory note as described in the sidebar. More people are planning five years in advance to transfer assets without penalty, but they are not the frail or infirm elderly.
• Spousal refusal isn’t as common in Rensselaer as in Suffolk, but workers said it is standard in most attorney applications.
• Workers agreed that 90 percent of cases had prepaid burial accounts.
• Life estates are more common in Rensselaer than Suffolk. They’re involved in 80 percent of LTC cases, workers explained.
• Asked how often they see private LTC insurance, Rensselaer workers said “maybe one per calendar quarter, a little under 1 percent.”

 

Medicaid Planning

 

Medicaid-financed LTC in New York is relatively easy to obtain under the basic eligibility rules. Medicaid planning—the practice of intentionally impoverishing oneself through legal techniques of varying sophistication—only needs to be employed when relatively large sums are involved.

Medicaid planners who assist in this process are usually attorneys but may also be CPAs, financial planners, or even former Medicaid eligibility workers. The National Academy of Elder Law Attorneys (NAELA) is the Medicaid planners’ trade association. NAELA lists 311 members in New York State. As detailed in the Appendix, Medicaid planning advice is universally available throughout the state, but New York City and downstate counties are especially saturated with such practitioners.⁵⁴

 

New York’s generous basic Medicaid eligibility rules, and the easy availability of Medicaid planning advice, ensure that virtually every New Yorker can qualify for Medicaid-financed LTC while preserving all or much of the family’s assets.

 

 

Home- and Community-Based Services—The Answer?

 

New York’s Medicaid program faces financial peril. Cutbacks have already strained LTC providers at all levels. This is due in part to lax eligibility requirements for Medicaid financed home care and nursing-home care. But another factor is also important. Historically, Medicaid paid primarily for nursing-home care.

 

Because most people prefer home care to nursing-home care, many otherwise eligible individuals deferred applying for assistance. For most of the past thirty years, however, New York Medicaid increased its payments for home- and community-based services. This was based on advice from academic researchers that home- and community-based services cost less than nursing-home care and that, therefore, the state could fund more of the services people prefer at less expense. For example, a recent AARP study of Medicaid financing for long-term services and supports (LTSS)⁵⁵ in New York made the argument: 

 

Numerous AARP and other surveys have documented the fact that people needing LTSS want to receive those services and supports in their homes, whenever possible. Although the types of services they need may vary considerably, services provided at home, as opposed to costly institutional care, save money for individuals, their families and public programs. On average, three people can be served at home or in the community for the cost of serving one person in a nursing home.⁵⁶

 

AARP recommends that New York Medicaid take full advantage of new ways authorized by the Patient Protection and Affordable Care Act of 2010 to maximize supplemental FMAP for a range of new and improved home- and community-based service options.

 

Decades of maximizing federal matching funds, however, has left New York heavily dependent on unreliable federal generosity. Furthermore, the presumption that shifting toward home- and community-based services will save Medicaid money is proving increasingly dubious. Review of the literature on the cost-effectiveness of home- and community-based services suggests ever more expansion of Medicaid home-care coverage may have less than satisfactory results. For example:

 

When compared to an elderly population for whom traditionally available care is offered, recipients of expanded community-based services do not use significantly fewer days of nursing home care.⁵⁷

 

An increasingly large number of studies, including the results of a national channeling demonstration program, have shown that noninstitutional services typically do not substitute for nursing home care, but, rather, represent additional services most often to new populations.⁵⁸

 

Although community-based LTC programs proved beneficial to both clients and informal caregivers in the LTC demonstrations, they did not prove budget neutral or cost effective.⁵⁹

 

The primary argument for the cost savings potential of home care rests on a comparison of the average per person Medicaid expenditures for people in the community and in nursing homes. The average annual Medicaid expenditures for home care for older people and adults with physical disabilities ($8,355 in 2004) per person are dramatically less than average annual Medicaid expenditures ($27,650 in 2004) per person for nursing home care. This comparison, however, is incomplete because it does not address differences in disability levels, use of acute care services, and the exclusion of housing and room and board costs from home care expenditures. Thus, it is not strictly an ‘apples to apples’ comparison.⁶⁰

 

Some recent research makes the case that perhaps someday funding more home- and community-based care through Medicaid will save money.⁶¹ As noted, however, most people prefer home care to institutionalization in a nursing home. So when Medicaid offers more home care and less nursing-facility care, it is reasonable to expect that more people will seek Medicaid eligibility than otherwise. In New York, with its exceptionally lenient Medicaid eligibility criteria, nothing prevents people from waiting until they need care, transferring assets without penalty to qualify for Medicaid home- and community-based services, and then five years later qualifying without penalty for skilled-nursing-facility care if it becomes necessary.

 

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