Testimony of Bill Hammond
Senior Fellow for Health Policy, Empire Center for Public Policy
Presented Before the Assembly Aging Committee
December 12, 2022
Home-based long-term care is a critical service that more New Yorkers will require as the state’s population grows older.
Yet few people have insurance that covers home care – or long-term care generally – causing most recipients eventually to rely on Medicaid, which is meant to be a safety-net health plan for the poor.
Helping more New Yorkers to obtain alternate coverage for long-term care has the potential to address a growing consumer need while also relieving an undue burden on taxpayers.
However, the Legislature should approach such proposals with caution – to avoid pitfalls that have caused New York’s existing home-care expenditures to balloon far beyond those of any other state.
Indeed, broadening long-term care insurance should go hand in hand with reforming Medicaid’s long-term care programs, because neither goal is likely to be achieved without the other.
The bulk of the state’s current home care program takes the form of “personal care,” which refers to non-medical services such as help without bathing, eating, getting dressed and keeping house.
New York has long covered this optional benefit far more generously than other states, and in recent years its spending has spiraled to new heights.
The state’s personal care costs currently amount to about $12 billion a year, which is almost as much as the other 49 states combined.
Its personal-care employment levels are also unusually high at 138 home health aides per 1,000 residents over 65, which is double the national average.
These trends are not explained by demographics alone. As discussed, New York’s personal care spending is by far the highest in the U.S., but it ranks 25th for the of its population over 65, and 19th for poverty. From 2015 to 2021, the state’s personal care spending soared by 178 percent, which was 10 times faster than the growth of its elderly population.
Meanwhile, the program is falling short of its original and most important purpose, which is to keep people out of institutions. The state’s per capita nursing home population is declining more slowly than in other states and remains 29 percent higher than the U.S. average.
This combination of facts – extreme levels of spending with no commensurate impact on the nursing home population – strongly suggests that New York’s personal care program is being overused, abused and defrauded.
In contrast to a nursing home placement – which patients and families try to avoid – state-funded personal care is a benefit that many people will readily accept. Patients who receive more hours than they need are in no danger of harm, and doctors who prescribe more hours than necessary are not accused of malpractice.
Personal care can also be vulnerable to fraud because it is delivered by unlicensed caregivers in private residences, usually with no on-site supervision. The risk is heightened when the aide is a friend or family member of the patient, which is allowed under the popular and rapidly growing “consumer-directed” form of personal care.
Despite these risks, the state’s eligibility rules for the benefit are relatively lax. People applying for Medicaid coverage for nursing home care are subject to a review of five years’ worth of financial transactions, to check if they have deliberately impoverished themselves by transferring money to relatives. For home-based care, by contrast, there is currently no such “look-back” period. (A two-and-one-half-year look-back was approved in 2020, but it has yet to go into effect.)
These policies make it relatively easy for higher-income recipients to qualify for Medicaid coverage for home care – especially with the help of lawyers who specialize in what’s known as “estate planning” or “Medicaid planning.”
The state’s efforts to police personal care fraud show signs of being weak. A federal study found that the state’s Medicaid Fraud Control Unit obtained just four convictions for personal care fraud from 2012 through 2015. That was 0.3 percent of the national total during a period when New York accounted for 29 percent of Medicaid spending on personal care.
Without significantly tightening these policies, it will be difficult if not impossible to establish a market for long-term care insurance – because few people will voluntarily pay for coverage if they see Medicaid as a no-cost fallback.
It has been suggested that the state should establish a mandatory “social insurance” program for home care. One current proposal along these lines calls for financing the coverage with a payroll tax, which would add to a tax burden that is already heavy relative to other states. The proposal does not estimate the rate, making it impossible to properly gauge the economic impact. It’s likely to be significant and increase quickly.
This program, too, would likely be undermined by Medicaid’s dysfunction. If it followed the same rules as Medicaid, it would face the same unsustainable levels of demand and spending. On the other hand, if the program included tighter limits on eligibility and benefits, consumers would be incentivized to switch to Medicaid as the more generous option.
An initiative to make long-term care insurance available and affordable for New Yorkers is a worthy goal. Designed properly, it would address a growing consumer need while relieving an undue burden on Medicaid and taxpayers.
The first and most important step lawmakers can take to achieve this goal is to bring Medicaid’s personal care benefit under reasonable control.
To avoid the economic harms associated with additional taxation – and assure the product is responsive to consumer demands – the program should be voluntary and market-based rather than mandatory and state-controlled.
 All statistics cited in this testimony are drawn from the author’s November 2022 report, “Long-Term Crisis: The Case for Reforming Medicaid ‘Personal Care’ in New York,” available at EmpireCenter.org.