Long-Term Care (LTC)

February 4th, 2014 by Leave a Comment

Georgia faces multi-faceted long-term care problems including:

  • A rapidly increasing elderly population
  • Higher numbers of recipients with disabilities or dementia
  • A Medicaid program already strained as the principal LTC payer
  • Dependence on funding from the heavily indebted federal government
  • State revenues constrained by recessionary pressures and limited future economic prospects
  • Very little private financing of LTC to relieve the budgetary pressure on public programs
  • Heavy public dependency on social programs and a growing “entitlement mentality” among the citizenry

LTC is expensive whether received in a nursing home, an assisted living facility or in one’s own home.[1] The risk of needing some form of long-term care after age 65 is 69%.[2] The catastrophic risk of needing five years or more is 20%.[3] Nevertheless, people often ignore the risk and cost of long-term care. Few save, invest or insure for the possibility of large long-term care expenses in later life.

Most people, when asked, say they believe Medicare pays for long-term care. It does not. Medicaid long-term care benefits are relatively easy to qualify for financially.[4] Peer reviewed research indicates that the availability of Medicaid long-term care benefits crowds out private financing and planning.[5] Other reliable research shows that, ironically, the rich gain as much or more from Medicaid’s long-term care benefits as the poor.[6]

Georgia’s 142,000 citizens over age 85 now will more than quadruple by 2050 at a rate (375%) that is third highest in the nation.[7] Somewhat mitigating the demographic risk, however, is the fact that long-term care costs less in Georgia compared to the national average. For example, charges for a semi-private nursing home room in the state average $181 per day compared to $222 nationally; a private, one-bedroom apartment in assisted living runs $3,077 per month compared to $3,550. Likewise, home health aides ($18 per hour) and adult day care ($64 per day) cost less in Georgia than the national averages, $21 per hour and $70 per day, respectively.[8] Georgians appear no more personally concerned about these risks and costs than other Americans. Their private long-term care insurance take up rate of 3.5% is well below the 4.5% national average for people age 40 and over who have the coverage.[9]

In Georgia, as in the rest of the country, Medicaid is the dominant payer for long-term care for the aged, spending $784 million or 76% of $1.02 billion in total for their nursing home care in 2011 and $134 million or 13% on waivered home and community-based services.[10]

Eligibility

Medicaid is a means-tested public assistance program. Eligibility depends on applicants meeting or spending down to apparently draconian income and asset levels. For example, to qualify for Medicaid-financed long-term care in Georgia, individuals must have incomes of $2,130 per month or less and countable assets of no more than $2,000.

Medicaid’s low asset limits are misleading. Extra income can be transferred into Miller income diversion or qualified income trusts (QITs) to allow people with much higher incomes to qualify. Otherwise countable assets can be converted into virtually unlimited exempt assets including up to $536,000 of home equity plus one automobile, prepaid burial plans, personal belongings and home furnishings of unlimited value.

People too wealthy to qualify even under these relatively generous standards often are able to legally reconfigure their income and assets to qualify for long-term care benefits. Common Medicaid planning techniques used in Georgia include asset transfers, promissory notes, annuities and purchase of exempt assets.

Georgia Medicaid backed off from several earlier plans to reduce eligibility as a consequence of the Maintenance of Effort (MOE) restriction in the Affordable Care Act. When budgetary problems were at their worst after the recession, with eligibility off the table, the state had only two remaining tools to control Medicaid expenditures: cut services or cut provider reimbursements. Georgia’s optional Medicaid services are already among the least generous in the country and its provider reimbursement levels are low as well. Cutting services hurts the poor especially and cutting reimbursements can damage care quality. Reducing financial eligibility for LTC services so that more prosperous recipients would need to spend more of their own money for their care would have been the least onerous way to deal with budget shortfalls. But due to the MOE, eligibility restrictions were not available options and remain so, although they are due to expire January 1, 2014.

Estate Recovery

Arguably, if Medicaid allows people to retain substantial wealth while receiving publicly financed LTC benefits, they ought to reimburse Medicaid for the cost of their care out of their estates. Otherwise, Medicaid operates as free inheritance insurance for their heirs. Georgia’s estate recovery program excludes the first $25,000 of an estate from recovery. Given that the average estate recovery in successful states is well below $25,000, it is highly doubtful that Georgia is maximizing non-tax revenue from this source.

Home equity conversion

In the absence of Medicaid’s home equity exemption, $536,000 in Georgia, many more people would use their home equity to pay for long-term care before becoming dependent on Medicaid. Reverse mortgages enable people age 62 and over to extract equity from their homes while continuing to live in them. That extra money could be used to fund home- and community-based services privately. But the reverse mortgage option ends where mobility, morbidity or mortality begins. Such mortgages become due and payable when the elder mortgagee becomes too ill to remain, moves out, dies or sells.

Alternatively, families who want to retain the elders’ home could pitch in to help pay for home care, assisted living or nursing facility care, providing in essence an informal family-based reverse mortgage. Many variations would be possible, but current public policy exempting a huge amount of home equity discourages all such options from a purely financial standpoint.

Facts

Georgia’s 142,000 citizens over age 85 now will more than quadruple by 2050 at a rate (375%) that is third highest in the nation.

Private LTC insurance market penetration in Georgia is minimal: 3.5 percent of the age 40 plus population compared to 4.5 percent nationally.[11]

Georgia is one of only seven states in which the age 85 plus population is projected to more than quadruple between 2012 and 2050.[12]

Georgia’s population age 65-plus with disabilities is high compared to the rest of the country. The state’s proportion of nursing facility residents with dementia is also high compared to the national average.

Nursing facilities in Georgia operate at a loss for their Medicaid residents, but that loss is not as large as the national average. The disparity between Georgia’s Medicaid nursing home reimbursement rate and the average private-pay rate is close to the national average.

Georgia has a larger proportion of family caregivers than the national average, but the value they contribute is relatively low. Nevertheless, the value of family caregiving in Georgia compared to the state’s Medicaid long-term care spending is very high, ranking Georgia number five in the country.

Georgia has controlled Medicaid expenditures remarkably well, but the state is heavily dependent on provider taxes, which are very vulnerable to federal government cutbacks.

Georgia ranks fifth highest in the nation on the percentage of nursing facility residents who rely on Medicaid as the primary payer.

Recommendations

1. In light of the on-coming wave of aging baby-boomers, many of whom will become frail and infirm, and recognizing that Medicaid is not a viable LTC funding source for the long term, Georgia officials, legislators and policy-makers should re-evaluate the current momentum to rely more and more heavily on Medicaid to fund long-term care.

2. Instead of making Medicaid long-term care more desirable by rebalancing to home and community-based care while leaving financial eligibility as generous as it is, the state should seek ways to target scarce public resources to the neediest Georgians and to eliminate access to publicly funded benefits by middle-class and affluent people without their either prepaying for care or repaying from their estates.

3. To avoid “crowding out” alternative private sources of long-term care financing and in order to encourage a privately financed home and community-based services infrastructure, Georgia should tighten Medicaid LTC eligibility criteria as much as possible under federal law as soon as the maintenance of effort restriction in the Affordable Care Act expires.

4. The state should seek waivers to enable it to eliminate or severely reduce the home equity exemption under Medicaid from its current level of $536,000 in order to encourage the use of home equity conversion to fund home care, assisted living and nursing home care privately.

5. Georgia should review its lien and estate recovery program under Medicaid, study other states that operate their programs more successfully, and seek laws, regulations and judicial interpretations to maximize non-tax revenues from this source.

Suggested Reading:

Government Role in Long-Term Care: It’s Getting Old,” Stephen Moses, December 2013, http://www.georgiapolicy.org/government-role-in-long-term-care-its-getting-old/#ff_s=coXg – This short article provides a good overview of the problem.

The Index of Long-Term Care Vulnerability: A Case Study in Georgia,” Stephen Moses, December 2013, http://www.georgiapolicy.org/ftp_files/IndexofLong-TermCareVulnerability.pdf – This study provides an in-depth analysis of long-term care in Georgia.



[1] “[T]he average annual cost of care in the U.S. is $94,170 for a private room in a nursing home; $82,855 for a semi-private room in a nursing home; $41,124 for an assisted living facility and; $18,460 for adult day care. The average annual cost of care received at home was approximately $29,640.” Source: John Hancock Life Insurance Company (John Hancock) biennial long-term care (LTC) cost study, press release published July 30, 2013, http://www.johnhancock.com/about/news_details.php?fn=jul3013-text&yr=2013.

[2] 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/.

[3] Ibid.

[4] Income rarely interferes with Medicaid LTC eligibility because most states subtract private medical and long-term care expenses from income before determining income eligibility and, in the rest of the states, Miller income diversion trusts allow applicants to divert excess income temporarily in order to qualify. Virtually unlimited assets are exempt including up to $802,000 of home equity in some states and $536,000 in other states. Also exempt under federal rules – with no limit – are income producing businesses, one automobile, term life insurance, personal belongings, home furnishings, prepaid burial funds, and Individual Retirement Accounts (IRAs) if they generate regular outlays as all are required to do after age 70 and a half. For details, see Stephen A. Moses, “Briefing Paper #2: Medicaid Long-Term Care Eligibility;” Center for Long-Term Care Reform, Seattle, Washington, 2011, http://www.centerltc.com/BriefingPapers/2.htm.

[5] 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.” Source: 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.

[6] “Richer people also get on Medicaid!” and “Richer people on Medicaid get big transfers.” Source: Testimony August 1, 2013 before the federal Long-Term Care Commission by Eric French (http://www.ltccommission.senate.gov/Eric%20French.pdf) based on research by Mariacristina De Nardi, Federal Reserve Bank of Chicago and University College London; Eric French: Federal Reserve Bank of Chicago and University, College London; and John Bailey Jones: SUNY-Albany. Citation: Mariacristina De Nardi, Eric French, and John Bailey Jones, “Medicaid Insurance in Old Age (REVISED June 2013),” Federal Reserve Bank of Chicago, Chicago, Illinois, WP 2012-13, June 2013; http://www.chicagofed.org/webpages/publications/working_papers/2012/wp_13.cfm.

[7] Third highest after Alaska (650%) and Nevada (474%). Source: Ari Houser, Wendy Fox-Grage, Kathleen Ujvari, “Across the States: Profiles of Long-Term Services and Supports, Ninth Edition 2012,” AARP, Washington, DC, 2012, p. 7, http://www.aarp.org/home-garden/livable-communities/info-09-2012/across-the-states-2012-profiles-of-long-term-services-supports-AARP-ppi-ltc.html.

[8] MetLife Mature Market Institute, “The 2012 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs,” state by state “Tables,” https://www.metlife.com/mmi/research/2012-market-survey-long-term-care-costs.html#tables.

[9] Ari Houser, Wendy Fox-Grage, Kathleen Ujvari, “Across the States: Profiles of Long-Term Services and Supports, Ninth Edition 2012,” AARP, Washington, DC, 2012, p. 103, http://www.aarp.org/home-garden/livable-communities/info-09-2012/across-the-states-2012-profiles-of-long-term-services-supports-AARP-ppi-ltc.html.

[10] “Data Source: DSS, Claims Incurred July 1, 2010 through June 30, 2011; paid through December 2011 and includes crossovers.” Cited in Thompson Reuters, “Georgia Department of Community Health Aged, Blind and Disabled (ABD) Profiles,” April 10, 2012, slide #13, http://dch.georgia.gov/sites/dch.georgia.gov/files/imported/vgn/images/portal/cit_1210/31/55/184043468ABD_Data-%20Final.pdf.

[11] Ari Houser, Wendy Fox-Grage, Kathleen Ujvari, “Across the States: Profiles of Long-Term Services and Supports, Ninth Edition 2012,” AARP, Washington, DC, 2012, p. 103, http://www.aarp.org/home-garden/livable-communities/info-09-2012/across-the-states-2012-profiles-of-long-term-services-supports-AARP-ppi-ltc.html.

[12] “The age 85+ population is projected to more than quadruple in seven states between 2012 and 2050: Alaska (+650%), Nevada (+474%), Georgia (+375%), Colorado (+369%), Utah (+323%), Texas (+318%), and Virginia (+307%).” Ibid., p. 7.

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The Foundation should take a lot of pride in your influence on Georgia governmental policy over the past several years. If you look back on several things that you were crying in the wilderness about several years ago, you will find that Governor Miller adopted them…your influence and your pressure on that process has been a major factor in governmental policy in Georgia. You should be congratulated.

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