The single biggest expense senior citizens face is long-term care. The risks and cost are huge: a 20 percent chance they’ll need five years or more, with costs of $181 per day for a nursing home in Georgia. Yet few Georgians worry or plan for long-term care. Only 3.5 percent of Georgians over age 40 own private insurance; the national average is 4.5 percent. Why don’t they?
The answer is surprising. Most frail or infirm elderly Georgians don’t pay for their own long-term care. In fact, expensive long-term care in Georgia is financed mostly by the state and federal government through Medicaid, a means-tested public assistance program. Georgia Medicaid spent a billion dollars on long-term care in 2011, most of it for nursing home care (76 percent) but a substantial portion (13 percent) for the more popular, waivered home care services. Medicaid recipients occupy 72 percent of the beds in Georgia’s nursing homes.
A reasonable assumption would be that long-term care’s high risk and cost must be wiping out the life savings of wide swaths of geriatric Georgians for so many of them to end up on Medicaid. To qualify for the program, people over age 65 are not supposed to retain more than $2,000 in assets nor more than $2,130 per month of income.
The way Medicaid eligibility actually works, however, is very different and results in most people qualifying for Medicaid-financed long-term care almost regardless of their income or assets. That’s the conclusion we reached in a study sponsored by the Georgia Public Policy Foundation and published recently in a report titled, “The Index of Long-Term Care Vulnerability: A Case Study in Georgia.”
Read it at www.georgiapolicy.org/ftp_files/IndexofLong-TermCareVulnerability.pdf.
This is what we found:
Georgians can circumvent Medicaid’s $2,130 per month income limit by setting up qualified income trusts (QITs). County eligibility workers provide “templates” to help families set up QITs, which enable people with substantially higher incomes to qualify for Medicaid-financed long-term care.
Nor are assets a significant obstacle to qualifying for Medicaid. The $2,000 limit applies only to cash or assets easily convertible to cash. Medicaid recipients in Georgia may also retain up to $536,000 worth of home equity, plus one automobile, prepaid burial plans, personal belongings and home furnishings of unlimited value.
Income and asset eligibility rules are even more generous for married couples and Georgia Medicaid is more lenient in this area than federal rules require. The spouse in the community can draw on the institutionalized spouse’s income to bring monthly income up to $2,898. The non-institutionalized spouse may retain $115,920 of the couple’s joint assets. Federal rules limit the income to $2,184 (without a household to maintain) and set the minimum asset limit to only half the joint assets, not to exceed $115,920.
On top of these already easy and elastic eligibility rules, even wealthier Georgians qualify by retaining Medicaid planning attorneys to impoverish themselves (or more often, their parents) artificially. Common Medicaid planning techniques used in Georgia include asset transfers, promissory notes, annuities and purchase of exempt assets. For example, according to county eligibility workers, annuities worth hundreds of thousands of dollars are established in ways that prevent the state from capturing any of the money to offset Medicaid costs.
But isn’t this retained wealth recaptured from the estates of deceased Medicaid recipients? Georgia Medicaid finally implemented an estate recovery program a decade after the federal Omnibus Budget Reconciliation Act of 1993 made one mandatory. Georgia’s program is set up in such a way, however — exempting, for example, the first $25,000 of an estate — that it is unlikely to recover very much revenue.
The upshot is that Georgia Medicaid makes free or subsidized long-term care available to most citizens of the state. The consequences of this generous policy are that few Georgians plan for long-term care or purchase insurance for it and most expensive long-term care is paid for by Medicaid, a large and rapidly growing program that consumes more and more state and federal resources.
For the state — taxpayers — to provide publicly financed long-term care to their parents after the insurable event occurs and without effective estate recovery sends a terrible message to baby-boomer heirs. That 77 million-strong generation, edging slowly toward old age themselves, will overwhelm the current financing system in time.
Georgia should seek ways to return Medicaid to its original intent: a long-term care safety net for people in need. Without that, Medicaid will remain free inheritance insurance for relatively prosperous heirs, deflating their sense of urgency about long-term care risk and cost, and resulting in too many ending their lives on Medicaid for that program to survive.
Stephen Moses is president of the Center for Long-Term Care Reform (www.centerltc.com) and author of “The Index of Long-Term Care Vulnerability: A Case Study in Georgia.” The Georgia Public Policy Foundation is an independent think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians.