[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
EXAMINING ABUSES OF MEDICAID ELIGIBILITY RULES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF
COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 21, 2011
__________
Serial No. 112-90
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Health Care, District of Columbia, Census and the
National Archives
TREY GOWDY, South Carolina, Chairman
PAUL A. GOSAR, Arizona, Vice DANNY K. DAVIS, Illinois, Ranking
Chairman Minority Member
DAN BURTON, Indiana ELEANOR HOLMES NORTON, District of
JOHN L. MICA, Florida Columbia
PATRICK T. McHENRY, North Carolina WM. LACY CLAY, Missouri
SCOTT DesJARLAIS, Tennessee CHRISTOPHER S. MURPHY, Connecticut
JOE WALSH, Illinois
C O N T E N T S
----------
Page
Hearing held on September 21, 2011............................... 1
Statement of:
Moses, Stephen, president, Center for Long-Term Care Reform;
David Dorfman, attorney, Law Offices of David A. Dorfman;
Janice Eulau, assistant administrator, Medicaid Services
Division, Suffolk County Department of Social Services; and
Julie Hamos, Director, Illinois Department of Healthcare
and Family Services........................................ 9
Dorfman, David........................................... 16
Eulau, Janice............................................ 21
Hamos, Julie............................................. 25
Moses, Stephen........................................... 9
Letters, statements, etc., submitted for the record by:
Dorfman, David, attorney, Law Offices of David A. Dorfman,
prepared statement of...................................... 18
Eulau, Janice, assistant administrator, Medicaid Services
Division, Suffolk County Department of Social Services,
prepared statement of...................................... 23
Gowdy, Hon. Trey, a Representative in Congress from the State
of South Carolina, prepared statement of................... 4
Hamos, Julie, Director, Illinois Department of Healthcare and
Family Services, prepared statement of..................... 27
Moses, Stephen, president, Center for Long-Term Care Reform,
prepared statement of...................................... 12
EXAMINING ABUSES OF MEDICAID ELIGIBILITY RULES
----------
WEDNESDAY, SEPTEMBER 21, 2011
House of Representatives,
Subcommittee on Health Care, District of Columbia,
Census and the National Archives,
Committee on Oversight and Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m. in
room 2247, Rayburn House Office Building, Hon. Trey Gowdy
(chairman of the subcommittee) presiding.
Present: Representatives Gowdy, Gosar, DesJarlais, Davis,
Clay, and Cummings [ex officio].
Staff present: Brian Blase, professional staff member; Will
L. Boyington and Nadia A. Zahran, staff assistants; Christopher
Hixon, deputy chief counsel, oversight; Sery E. Kim, counsel;
Mark D. Marin, senior professional staff member; Jaron Bourke,
minority director of administration; Yvette Cravins, minority
counsel; Ashley Etienne, minority director of communications;
Devon Hill and Adam Koshkin, minority staff assistants; and
Jennifer Hoffman, minority press secretary.
Mr. Gowdy. Good morning. Welcome to everyone.
This is a hearing on examining abuses of Medicaid
eligibility rules. Pursuant to committee rules, I will read the
mission statement.
We exist to secure two fundamental principles. First,
Americans have a right to know the money Washington takes from
them is well spent. Second, Americans deserve an efficient and
effective government that works for them. Our duty on the
Oversight and Government Reform Committee is to protect these
rights. Our solemn responsibility is to hold government
accountable to taxpayers because taxpayers have a right to know
what they get from the government.
We will work tirelessly in partnership with citizen
watchdogs to deliver the facts to the American people and to
bring genuine reform to the Federal bureaucracy. This is the
mission of the Oversight and Government Reform Committee.
I will now recognize myself for an opening statement and
then the gentleman from Illinois, ranking member, Mr. Davis.
As this committee's mission statement just made clear,
Americans have a right to know the money Washington takes from
them is well spent. Americans also have the right to know
whether social programs that were designed for a specific
purpose have been hijacked wittingly or unwittingly by those
who have figured out how to game the system.
Today, we will examine alleged abuses of Medicaid
eligibility rules. As we do, we are guided by the principle
that each dollar taken from a private citizen has a real cost
and government needs a compelling rationale for taking that
dollar.
To be clear, this country has a rich history of providing a
social safety net for the elderly and the indigent. Some seek
to turn the safety net into a hammock or trampoline. Not only
is this fiscally irresponsible, it erodes the very little
public trust people have left in the institutions of
government.
Without question, the Medicaid program is on an
unsustainable course. Over the past two decades, national
Medicaid spending has increased from less than $75 billion per
year to over $400 billion per year. At the State level,
Medicaid growth has put tremendous pressure on budgets and is
crowding out other State priorities such as education and
public safety. At the Federal level, Medicaid growth has the
same effect. Plus, it is contributing to our national debt at
more than 40 cents of each dollar is borrowed.
Medicaid is a means tested welfare program designed to
provide medical care to the poor and disabled. But, today's
testimony will reveal that Medicaid is not being used solely by
the indigent. Although Medicaid technically has income and
asset tests, these tests are easy to circumvent and abuse. In
fact, an entire cottage industry has arisen seeking to educate
the wealthy on how to transfer or hide assets, so taxpayers can
pay for their long term care.
In 1982, Congress made it clear all of the resources
available to an institutionalized individual, including equity
in a home which are not needed for the support of a spouse or
dependent children, will be used to defray the costs of
supporting the individual and the institutions. Despite this
congressional intent, all the resources available to the
institutionalized individual are not being used to defray the
taxpayers' cost of supporting these individuals.
According to the CMS, less than 1 percent of the money
spent on nursing home care is recovered. The art of
artificially impoverishing oneself to gain Medicaid coverage
has spawned a stand alone industry. Medicaid planning is
pervasive. A Google search which includes quotes around
Medicaid planning yield over a half million hits. Popular books
are available like the one entitled, ``How to Protect Your
Family's Assets from Devastating Nursing Home Costs: Medicaid
Secrets.''
This book includes tips on how to title your homes so you
don't lose it to the State, how to make transfers to family
members that don't disqualify you from Medicaid, how annuities
make assets disappear, smart tricks for spending down your
assets, what to change in your will to save thousands of
dollars if your spouse ever needs nursing home care to avoid
the State's reimbursement claim, following the nursing home
resident's death. Government programs should not have secrets
and artificially impoverishing oneself to become eligible for a
program that was not designed for you is wrong.
In 2006, the Europost ran an article about Medicaid
millionaires in one county in the State. In that year, nine
millionaires had taxpayers paying for their Medicaid bills. One
man, worth nearly $2 million, had Medicaid pick up over $80,000
in nursing home costs for his wife. One woman, worth $1.6
million, had Medicaid pick up over $200,000 in nursing home
costs for her husband.
Since half of New York's Medicaid bill is financed by
Federal taxpayers, taxpayers in my home State of South Carolina
are paying for millionaires on Medicaid in New York.
About once a decade, Congress revisits the eligibility
rules for Medicaid to crack down on their abuse. In 1993 the
Omnibus Budget and Reconciliation Act, Congress required States
to do a State recovery. In the 2005 Deficit Reduction Act,
Congress closed some loopholes and extended Medicaid's look-
back period. Today's testimony will reveal whether previous
congressional action in this area has worked.
We all know that tough choices are coming and that there
will be strong partisan differences about the way forward.
Today's hearing offers us an opportunity to explore an area
where there should be genuine bipartisan agreement. Medicaid
was intended for the poor and the disabled. Millionaires should
not be on welfare. If the rules of Medicaid allow individuals
with sizable portfolios to qualify for the program and protect
the inheritance of their children, then Medicaid needs
reforming.
[The prepared statement of Hon. Trey Gowdy follows:]
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Mr. Gowdy. With that, I now recognize the gentleman from
Illinois, the ranking member, Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman. Let me thank
you for holding this very important hearing.
I also want to thank all of the witnesses for being here. I
would especially like to thank Ms. Julie Hamos who probably
just came in this morning on the flight that I usually take
when I want to get here by 10 a.m. And, sometimes the traffic
is difficult and you have a hard time making it. Thank you very
much, Julie.
Mr. Chairman, I appreciate the importance of this hearing
and I am happy to have dialog on this very critical issue.
Since its inception in 1965, I have always said that
Medicaid and Medicare were the best things that happened to
health care, especially for elderly and low income people in
this country, since the Indians discovered corn flakes. I am a
firm believer that those individuals who have no other
recourse, who have no other way to be cared for, should, in
fact, be cared for by the resources that we make available to
them.
The Medicaid Program funds one of six of all personal
health spending in the United States. Additionally, Medicaid
spending has increased to over $400 billion last year. This
number gives us pause. Those of us who continue to view
Medicaid solely as a budget challenge are missing the mark.
This program involves real people and is about real people and
their needs.
Policy solutions that focus only on limiting public
obligations or long term care financing do the citizens of our
country a great injustice. Realistically, individuals and
families bear the majority of care giving and financial
consequences. Families and friends provide upwards of 80
percent of long term care in the United States. I am open to
new ideas to facilitate the care of people across all age
groups who are needy and certainly not for those who are simply
greedy.
But these discussions cannot be filled with flawed
assumptions about peoples' resources. The vast majority of
Medicaid's enrollees have limited resources, including the 33
million children, the 11 million persons with disabilities, the
17 million non-disabled adults and the 6 million seniors.
In Illinois, more than 2.7 million Illinois seniors,
children and individuals with disabilities rely on Medicaid
services and programs. Long term care is a valued program. It
includes medical as well as non-medical care to those who have
a chronic illness or disability. Long term care helps meet
health or personal needs. Most long term care is to assist
people with support services such as activities of daily living
like dressing, bathing and using the bathroom. Long term care
can be provided at home in the community, in assisted living or
in nursing homes. The dignity and peace of mind given to people
who utilize these services is immeasurable.
Certainly there are those who attempt to misuse the system,
but the vast majority of enrollees are simply those who
otherwise would not have the wealth or income for such personal
daily care. These bad actors must not cause us to throw up our
hands and surrender.
I have a term that I often use that says, ``I don't ever
want to throw out the baby with the bath water.'' I want to
throw out all of the waste, abuse and misuse of the program
that we possibly can. Medicaid must continue to provide
coverage based on Federal standards that ensure maximum access
for low income and special needs populations with funding
allocations based on the needs of these populations.
A meaner Medicaid is not a sufficient solution. Now is not
the time to reduce access. Compassion and common sense must
prevail. Affordable, accessible quality health care should not
be a partisan or political issue but a human one.
Last, I am proud that Ms. Hamos has agreed to join us and I
am delighted again that she was able to make it.
I agree with you, Mr. Chairman, I agree wholeheartedly that
those individuals who are misusing the system, those
individuals who are using it as a way to make sure that they
can transfer wealth, all of those efforts that are underway to
provide subterfuge, to provide ways to deny access to
individuals who really need the services. I will work with you
and other Members of this body to exercise, to carve out and
get rid of all those individuals and those opportunities.
Again, I thank you for the hearing and look forward to the
testimony of the witnesses.
Mr. Gowdy. I thank the gentleman from Illinois.
I would now recognize the gentleman from Arizona, the vice
chairman of the subcommittee, Dr. Gosar.
Dr. Gosar. Mr. Chairman, I would like to echo the concerns
that you shared about the unsustainable growth in Medicaid
spending.
This is a significant problem in my State of Arizona. The
crippling recession of late has affected my State tragically,
reducing the money in the General Fund by $2 billion in only a
couple short years. The Governor and legislature are finding of
the biggest expenses the State has is its Medicaid Program.
In a time when this program meant for low income people in
need of basic health care is facing deficits, we need to
explore critical reforms that will ensure limited Medicaid
dollars reach those who need it most. I think we will find
today that long term care eligibility standards in current
Federal law do not achieve this goal.
I also agree with you that this hearing should be
bipartisan. We have strong disagreements with the massive
Medicaid expansion contained in the President's takeover of
health care, but we should be able to find common ground. The
taxpayer program should not serve as inheritance protection and
that the rules that can be navigated so millionaires can
qualify for welfare are in desperate need of reform.
According to the law firm, Wright, Abshire in Houston, TX,
even if a client's assets are substantial, the firm will be in
almost every case be able to successfully achieve a
satisfactory plan for the client to preserve assets. An
organization in California called Nursing Home Solutions
states, ``We get middle class families excellent nursing home
care funded by Medi-Cal.'' This advertising makes Medicaid
planning sound like the proverbial free lunch.
But while the individual family benefits from taxpayers
supporting long term care services received by that individual,
there are also clear costs. The obvious cost is to future
generations and business owners who will have to pay this bill
and who have the result of less capital to invest in the
economy. The less obvious cost is that nursing homes and long
term care providers are harmed by more individuals receiving
Medicaid's low reimbursement rate.
So the policy question is, who should bear the burden of
paying the cost of long term care? It would be convenient to
say the other guy, but what happens when the other guy is
tapped out? Taxpayers are simply tapped out and our Nation is
running a $1.6 trillion deficit for the third straight year.
Our friends on the other side of the aisle may say this
cost should be socialized, but that solution is misguided for
two reasons. The first is that we need to be figuring out ways
to reform Medicare and Medicaid, not to expand it. The second
is that it runs counter to the obvious principle that
individuals spend their own money better than they spend other
people's money. Since the private sector does most things
better than the government, can the private sector play a role
in figuring out a way out of this problem?
I respectfully assert that the free market solutions have
never been able to take hold in the market for long term care
because of Medicaid. Since it is so easy to get taxpayers to
foot a person's long term care needs, individuals don't have
any incentive to plan for these expenses.
Don't take my word for it, whoever, In 2008, Jeff Brown at
the University of Illinois and Amy Finklestein of MIT wrote an
article entitled, ``The Interaction of Public and Private
Insurance, Medicaid and a Long Term Care Insurance Market.''
This article appeared in the Nation's most prestigious peer-
reviewed economics journal, American Economic Review.
The findings are that all but the wealthiest households in
the country have virtually no reason to purchase long term care
insurance. This is because a private policy pays for many
benefits that simply replace benefits Medicaid would have paid
for. It is important to note that Brown and Finklestein did not
even account for the art of Medicaid planning. They assumed
that people actually have to spend down their assets in order
to qualify for Medicaid.
Therefore, it is unfair to criticize the private, long term
care insurance industry for lack of policies. A private insurer
is not competing on a level playing field with Medicaid since
Medicaid is so heavily subsidized.
The way I see it is, the choice is clear. We can fail to
reform these rules. This would continue to allow relatively
affluent individuals on welfare to discourage all of us from
taking seriously the possibility of needing to take care of
long term care in the future. This failure will doom the whole
system as a whole.
The alternative is to reform the rules and reduce the
loopholes. Real reform should prevent affluent people from
qualifying for welfare with the effect of preserving the
inheritance of their adult children. Real reform would also
promote personal responsibility and awaken Americans to the
fact that while living longer is a great thing, it comes with
the possibility of requiring assistance. Real reform would
preserve taxpayer dollars to assist genuinely needy individuals
in getting care. Real reform would reduce Medicaid burden on
State budgets and the Federal budget and would decrease the
amount of money that Washington borrows from abroad.
Mr. Chairman, thank you for calling this hearing. I eagerly
await the testimony of our witnesses to learn more about this
issue and steps that can be taken to reform the program.
I yield back.
Mr. Gowdy. I thank the gentleman from Arizona.
I would also like to recognize and thank the gentlemen from
Missouri and Tennessee, respectively, for their presence and
their contributions to this subcommittee.
Members may have 7 days to submit opening statements and
extraneous material for the record.
It is now my pleasure to welcome our distinguished panel of
witnesses. I will introduce you at once and then we will go
from my left to right, your left to right, in terms of opening
remarks.
Mr. Stephen Moses is the president of the Center for Long-
Term Care Reform. Mr. David Dorfman is an attorney with the law
offices of David A. Dorfman. Ms. Janice Eulau is the assistant
administrator, Medicaid Services Division, Suffolk County
Department of Social Services. My friend, Mr. Davis, joins me
in introducing and welcoming the Honorable Julie Hamos,
director of the Illinois Department of Healthcare and Family
Services.
Pursuant to committee rules, all witnesses will be sworn
before they testify, so I would ask you to please rise and
raise your right hands.
[Witnesses sworn.]
Mr. Gowdy. Let the record reflect that the witnesses
answered in the affirmative.
Mr. Moses, we will start with you. The lights, which I hope
you can see, mean what they traditionally mean. Green means go.
Yellow, unlike in real life does not mean speed up and see if
you can get under it, means you have about a minute left and
then, red means conclude your last comment if you can.
With that, again on behalf of all of us, thank you. We are
honored to have such a distinguished group of witnesses.
Mr. Moses.
STATEMENTS OF STEPHEN MOSES, PRESIDENT, CENTER FOR LONG-TERM
CARE REFORM; DAVID DORFMAN, ATTORNEY, LAW OFFICES OF DAVID A.
DORFMAN; JANICE EULAU, ASSISTANT ADMINISTRATOR, MEDICAID
SERVICES DIVISION, SUFFOLK COUNTY DEPARTMENT OF SOCIAL
SERVICES; AND JULIE HAMOS, DIRECTOR, ILLINOIS DEPARTMENT OF
HEALTHCARE AND FAMILY SERVICES
STATEMENT OF STEPHEN MOSES
Mr. Moses. Thank you, Mr. Chairman and members of the
committee. Thank you for inviting me to speak to you about
Medicaid and long-term care financing today.
I have worked in this field since 1981, first as a career
U.S. Government employee with the Health Care Financing
Administration, the predecessor of the current CMS; then for
the Inspector General of the U.S. Department of Health and
Human Services; and since 1989, in the private sector. I am
currently president of the Center for Long-Term Care Reform.
In each of these roles, I conducted national and State
studies of Medicaid and long-term care financing. My remarks
today are fully developed and documented in published reports
available on our Web site at centerltc.com.
Medicaid is supposed to be a long-term care safety net for
people in dire financial need. Instead, it has become the
dominant payer for most Americans who require extended care at
home or in a nursing, including the middle class and even the
affluent. How can this be true if Medicaid is a means-tested
public assistance program? That is the key question before you
today. Here is the answer.
Although everyone says Medicaid eligibility requires low
income, that is untrue for people over the age of 65 who need
long term care. Federal rules require most States to deduct
medical expenses, including the cost of nursing home care, from
applicants' income before determining eligibility. Some States
apply income caps but these are easily evaded by means of
special income diversion trusts. Bottom line, income almost
never disqualifies anyone for Medicaid long term care
eligibility.
What about assets? It is true that cash and negotiable
securities over $2,000 are disqualifying in most States, but it
doesn't matter how people spend down to that level as long as
they don't give away their assets. Financial advisors
frequently tell clients to purchase exempt assets, take a world
cruise, throw a big party, all non-disqualifying spend-down
methods.
Just how many exempt assets can applicants retain and still
qualify for Medicaid long-term care benefits? There really is
no meaningful limit. Exempt home equity is capped at $500,000
to $750,000 which is 13 to 20 times the amount protected in
England's socialized health care system.
The following resources are exempt without any limit: one
business including the capital and cash-flow; individual
retirement accounts or IRAs; one automobile; prepaid burial
plans not only for the Medicaid recipient but for all immediate
family members; term life insurance which allows recipients to
evade the Medicaid estate recovery mandate; and household goods
and personal belongings, all without any capped limits.
The Federal regulations and policies that require these
exemptions are documented in our report entitled, ``Medi-Cal
Long-Term Care: Safety Net or Hammock.'' Medi-Cal is Medicaid
in California and these problems and issues apply nationwide.
Married applicants for Medicaid LTC benefits can retain
substantially more income and assets than single people, up to
$2,739 per month of income and half the joint assets of the
couple up to $109,500. If the healthy spouse's personal income
and assets are below these levels, the Medicaid spouse's income
and assets are transferred to bring him or her up to the limit.
These spousal impoverishment protections increase annually with
inflation.
Because of these very generous basic eligibility rules, the
vast majority of America's elderly qualify easily for Medicaid
when they need long term care. The conventional wisdom that
people must spend down into impoverishment before Medicaid will
help is demonstrably untrue. Only the most affluent need to
consult Medicaid planners and use special legal techniques such
as trusts, transfers, annuities, life estates, life care
contracts and promissory notes to qualify.
The other panelists will discuss Medicaid planning. The key
point I want to make is that we need to remember that egregious
Medicaid planning is only the tip of the iceberg. The bigger
problem is that Medicaid's basic eligibility rules allow most
people to qualify after they need long term care and without
spending down their wealth first.
To conclude, easy access to Medicaid has the effect of
desensitizing the public to long term care risks and costs.
Medicaid's home equity exemption prevents people from using
reserve mortgages to finance home care. With most of their
assets protected by Medicaid, few people plan early to save,
invest or insure for long term care.
Well intentioned public policy has turned into a perverse
incentive discouraging responsible long term care planning.
Furthermore, consuming scarce public welfare resources to
indemnify affluent baby-boomer heirs of well-to-do seniors
hurts the poor instead of helping. It is like friendly fire in
the class war.
Medicaid could save up to $30 billion per year if people
had to consume their home equity before qualifying for public
benefits as is true in England. The program's most expensive
dual eligible recipients could be reduced by 20 percent.
Reverse mortgages to fund long term care would thrive and
generate new jobs and tax revenue.
The private long term care insurance market would expand
creating even more jobs and revenue, but most importantly,
relieving the financial pressure on Medicaid in this way would
enable the program to survive as a quality safety net for those
who are truly in need.
My analysis explaining how Medicaid can save $30 billon per
year by encouraging financing of long term care through private
financing alternatives has been made available to the
committee.
Thank you.
[The prepared statement of Mr. Moses follows:]
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Mr. Gowdy. Thank you, Mr. Moses.
Mr. Dorfman.
STATEMENT OF DAVID DORFMAN
Mr. Dorfman. Good morning, Mr. Chairman, and members of the
committee. Thank you so much for having me here this morning.
My name is David Dorfman and for about the last 20 years
until January of this year, I practiced Medicaid planning law
in Manhattan, Brooklyn and Queens.
I came to elder law out of a family experience. My
grandmother and her two sisters all went to Portia Law School,
the first law school for women in Boston in the 1930's. I grew
up with elder law around the house, when her friends would come
over to probate their husbands' wills, to transfer keys to the
children, to take care of those family matters that her senior
friends had.
When I began my practice, OBRA 93 had just become the law
and I attended Bar Association meetings, met leaders in the
Medicaid legal field and began teaching other people how the
system works because while Medicaid is certainly not a secret
program, it is so difficult for people to understand how it
works, given the massive unfairnesses and confusion in
qualifying for benefits.
My clients would come to me typically because they had a
spouse who had Parkinson's or Alzheimer's, a parent who needed
care, and they didn't know what to do. They weren't sure what
their options were. What we set about doing was educating
people as to how the system works and creating an individual,
tailored plan, much like for health care, what was the best
thing for that particular individual to do.
It might be trusts or annuities, changing title to the
home, investing in pensions or insurance, but I am going to
suggest that the abuse is a myth. That is not really what is
happening. That is not what any of my clients wanted. None of
them wanted to game the system. They all wanted to know what
should I do, the same way a woman whose husband has had a
stroke says to the doctor, what am I supposed to do, they say
to the social worker, what am I supposed to do, how am I
supposed to live, where will I be living, what will happen to
the pension, the social security, who is going to provide the
care?
Soup kitchens are free and nobody checks 5 years worth of
bank statements and millionaires don't go there for lunch.
In terms of creating a health care system, we don't need a
punishment health care system, periods of ineligibility or
penalty periods. We need a system that has a cost sharing
approach that invites people in so they can access necessary
care and share in the costs. That is what people want, not an
all or nothing approach. We can't mandate abject poverty
because that is what people are terrified of. If that has to be
created, no matter what the rules are, people will do whatever
they have to do to get the necessary health care for their
loved ones or they will suffer and die without care.
I saw people who were increasingly afraid to get care as
Medicaid laws became more onerous, people who qualified for
benefits, people who were poor and needed health care but
didn't fill out the application because they didn't have the
bank statements. Let us create a system that invites people in
who need care, not one that punishes them.
Thank you.
[The prepared statement of Mr. Dorfman follows:]
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Mr. Gowdy. Thank you, Mr. Dorfman.
Ms. Eulau.
STATEMENT OF JANICE EULAU
Ms. Eulau. Good morning, Chairman Gowdy, Ranking Member
Davis and members of the subcommittee. Thank you for the
opportunity to speak to you today about this important topic.
My name is Janice Eulau and I have been employed by the
Suffolk County, New York Department of Social Services for the
past 36 years. I currently serve as the assistant administrator
for the Medicaid Program in that county.
Approximately 180,000 individuals receive Medicaid in
Suffolk County with 5,300 in receipt of nursing home care. In
2010, the nursing home care costs for those 5,300 individuals
was $429.9 million with a Federal cost of $213.7 million.
As a long-time employee of the local Medicaid office, I
have had the opportunity to witness the diversion of
applicants' significant resources in order to obtain Medicaid
coverage. It is not at all unusual to encounter individuals and
couples with resources exceeding $500,000, some with over $1
million.
There is no attempt to hide that this money to exists,
there is no need. There are various legal means to prevent
those funds from being used to pay for the applicant's nursing
home care. Wealthy applicants for Medicaid's nursing home
coverage consider that benefit to be their right, regardless of
their ability to pay themselves. There is limited understanding
that Medicaid nursing home care remains a means tested program
not an entitlement program. This misunderstanding seems to be
perpetuated by the elder law and Medicaid estate planning
industry.
The two most often used by single clients is the promissory
note. Half of the applicant's excess resources transfer to the
children without compensation. This transfer results in a
penalty period where Medicaid will not pay for nursing home
care, approximately 1 month for every $10,000 transferred. The
other half of the excess resource is also transferred to the
children but in return for a promissory note which will produce
an income stream to cover the cost of care during the penalty
period. Our county regularly sees promissory notes in excess of
$150,000 with matching, uncompensated transfers.
For couples, the most common method of preserving resources
is spousal refusal. In this case, the spouse in the nursing
home transfers all resources beyond those he is allowed to keep
to the well spouse living at home, since transfers to a spouse
do not incur a penalty period. In New York, the
institutionalized spouse may retain $13,800. The spouse living
at home can retain up to $109,000. In addition, the home and
prepaid burial expenses are exempt.
Any amount in excess of these resources is deemed available
to meet nursing home costs. However, Federal law allows the
spouse at home to refuse to support the applying spouse and
requires States to then base Medicaid eligibility determination
on the income and assets of only the applying spouse.
States then have the right to bring support proceedings
against the refusing spouse. My county has pursued the refusing
spouse in the past. However, in family court, we are only
allowed to address the excess income and attach resources for
past Medicaid payments. Any future proceedings would need to be
addressed in New York Supreme Court, a process that would take
months or years for each case and severely strain our limited
local resources.
The remedy for these abuses lies in education as well as
changes to law. Many seniors believe that Medicare and their
supplemental insurance policy will pay for the nursing home
care when in fact these policies will only pay up to 100 days
of care and only under certain circumstances.
Medicaid communication through their annual handbook and
their official Web site is woefully lacking information in this
area. Not surprisingly, wealthy seniors fail to realize the
value or need for long term care insurance. Having a better
understanding of the limits of Medicaid would enable seniors to
make timely and informed decisions regarding their future care
needs. In addition, incentives for the purchase and use of long
term care insurance should be provided by the Federal
Government.
I also respectfully suggest that the law allowing spousal
refusal be adjusted to enforce the current resource limit and
allow the spouse at home to petition court for higher resource
levels should his or her circumstances call for such an
increase instead of requiring the State to address each
refusal. Allowing wealthy spouses to ignore their financial
responsibility to one another is a policy we cannot afford.
In closing, I would hope that the Medicaid Program can
fulfill its original mission, to provide quality health
coverage to individuals who are unable to afford such care or
the insurance to pay for this care. However, individuals with
resources above and beyond the level prescribed by law should
not be allowed to fund their children's inheritance while the
taxpayers fund their nursing home care. I strongly believe this
is not a partisan issue. I also believe in the merits of the
Medicaid Program but feel just as deeply that these issues
regarding resource diversion need to be addressed.
Thank you.
[The prepared statement of Ms. Eulau follows:]
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Mr. Gowdy. Thank you, Ms. Eulau.
Ms. Hamos.
STATEMENT OF JULIE HAMOS
Ms. Hamos. Thank you.
Good morning, members of the subcommittee and Mr. Chairman.
I am Julie Hamos, director of the Illinois Department of
Healthcare and Family Services, which among our other
responsibilities, manages one of the largest Medicaid programs
in the Nation. Illinois serves 2.7 million clients through
Medicaid and SCHIP at an overall program cost of $16.6 billion.
Today, we are talking about eligibility policies for
Medicaid long term care and this, for us in Illinois, is a most
propitious time to be talking about this since we are tackling
this exact issue. As a new director of HFS last April, I
learned that Illinois' previous administration had not yet
implemented the Federal DRA that passed in 2006.
Accordingly, almost immediately when I came in, we set to
work to create rules involving Medicaid eligibility for long
term care, rules that incorporate the DRA but go beyond it to
actually deal with the loopholes that you are hearing about
today since we have now learned from the experiences of other
States.
Some of those loopholes are, in fact, spelled out in the
Council for Long Term Care Report that I have read very
closely. I have to be honest and tell you that this is a
struggle in Illinois to convince our legislative rulemaking
committees to adopt these rules. This is not a Democrat nor
Republican problem. There seems to be, much to my surprise, a
bipartisan acceptance of the so-called Medicaid estate planning
practices that allow people to divest their assets in order to
qualify for Medicaid nursing homes. The paper, I think,
articulates the problem which is that there is no stigma
attached to this.
We agree with you that it is our responsibility to
eliminate any abuse in the Medicaid Program and we are working
hard right now to move along on some of these reforms. Today, I
would like to touch on two other issues that have the potential
to drive down Medicaid costs for long term care.
Of our 2.7 million clients, 14 percent are seniors and
adults with disabilities, yet these 14 percent of Medicaid
clients incur 54 percent of the costs. Many of these same
clients are also expensive dually eligible Medicare clients.
While we are fully committed to providing for their care and
maintenace, most of them really are low income and very
vulnerable people, and they need long term care, but our focus
is all about service delivery reform.
Illinois historically has had an institutional bias
building up state-operated institutions and nursing home beds.
We currently have an excess of 15,000 empty nursing home beds,
so we have overbuilt on that side but we have failed to invest
in home and community-based services, obviously at a much
better cost.
We believe that we can achieve Medicaid savings and promote
a higher quality of life for seniors and disabled who prefer to
stay in their homes by rebalancing our long term care system to
shift from nursing homes and make investments in home and
community-based services.
In addition, many health care services are fragmented for
both Medicaid and Medicare and result in unnecessary and
wasteful hospitalizations with the revolving door of admissions
and readmissions to acute care hospitals, to psych wards of
hospitals and to free-standing psychiatric hospitals.
In order to drive down these costs, Medicaid must, in
conjunction with Medicare for those who are dually eligible,
provide care coordination for these most complex and expensive
clients who have chronic health and behavior health conditions
with the goal of keeping them healthier, stable in the
community and not in hospitals but in community-based long term
care.
I just want to convey to you that in this period of the
Affordable Care Act planning, we are spawning an era of
innovation in the health care delivery system. Federal CMS is
offering incentives and guidance almost daily to encourage us
to focus on quality healthcare and health outcomes in home and
community-based settings that will ultimately result in cost
savings for both Medicaid and Medicare.
I urge you to maintain the Federal funding for State
Medicaid programs and funding for these Federal demonstrations,
waivers, innovations and policy initiatives. They present the
unique opportunity to truly transform the Medicaid Program into
a more effective and efficient health care system.
Thank you.
[The prepared statement of Ms. Hamos follows:]
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Mr. Gowdy. Thank you.
I will recognize myself for 5 minutes of questions.
Mr. Dorfman, what is the purpose of Medicaid?
Mr. Dorfman. The purpose of Medicaid is to provide health
care.
Mr. Gowdy. Universal health care or just for the indigent?
Mr. Dorfman. The program has financial qualifications
which----
Mr. Gowdy. I hadn't gotten to those yet. I am just asking
you a general question. Do you think the purpose of Medicaid is
to provide universal health care or only for the indigent?
Mr. Dorfman. Health care for anyone who qualifies for the
program.
Mr. Gowdy. Do you agree with me that there is a difference
between actual indigency and legal indigency?
Mr. Dorfman. Absolutely, there is an incredible
distinction.
Mr. Gowdy. So people can voluntarily impoverish themselves?
Mr. Dorfman. People can voluntarily impoverish themselves.
Mr. Gowdy. To become eligible for government programs?
Mr. Dorfman. Absolutely.
Mr. Gowdy. Do you think that is consistent with the
underlying purpose and mission behind Medicaid?
Mr. Dorfman. It absolutely can be, yes.
Mr. Gowdy. You seem to take exception to my
characterization of people gaming the system. You don't believe
that millionaires who voluntarily impoverish themselves so
their heirs can inherit money and taxpayers can provide for
their Medicare, you don't consider that gaming the system?
Mr. Dorfman. No, because that is not most of what happens
or the way it happens. There are those aberration cases.
Mr. Gowdy. Are there millionaires who have voluntarily
impoverished themselves so their children can have an
inheritance and we can pay for their long term care?
Mr. Dorfman. That is not the typical experience across 20
years of doing Medicaid planning, although there are certainly
exceptions.
Mr. Gowdy. When people come, and I am not trying to violate
any attorney-client privilege, but when people come to seek
your counsel, how often do they come by themselves and how
often do they come with their adult children?
Mr. Dorfman. They frequently come with their adult
children. It is almost always with either a spouse or an adult
child, unless it is an isolated individual who doesn't have
family.
Mr. Gowdy. You consider your client to be whom, the
individual or the children?
Mr. Dorfman. The client is always the individual, but the
individual is almost always concerned about what is going to
happen to their spouse or family members.
Mr. Gowdy. Speaking of spouses, Mr. Moses, what is spousal
refusal?
Mr. Moses. Well, that is a practice recognized primarily in
New York and Florida whereby the well spouse, as Ms. Eulau
explained, simply refuses to contribute under normal Medicaid
requirements for the cost of the care of the Medicaid
recipient. Under the law, the Medicaid recipient has to have
assigned his or her rights to the wealth in essence so that the
State can go after the well spouse for what is legally owed but
this rarely happens because it is so complicated to do.
The Elder Law Bar in frequent annual conferences urges the
rest of the country to take advantage of what they consider our
right under the Federal law to simply have the spouse refuse to
contribute to the cost of the care. It is very, very expensive
in New York and Florida. Frankly, I don't think most of the
other States have the impunity to try to pull that off.
Mr. Gowdy. Before I ask you about key payments, Mr. Dorfman
and I disagree a little bit about the purpose of Medicaid. I
think it is for the indigent, he thinks it is for whomever
qualifies. What do you think?
Mr. Moses. Well, there are problems in how Medicaid
eligibility is determined so that there are what some people
call loopholes but there are provisions in the law that make it
quite easy and feasible for people with substantial wealth to
qualify. As I explained in my testimony, the real problem is
not just the tip of the iceberg which is the egregious Medicaid
planning millionaires onto welfare, as Mr. Dorfman was saying,
the real problem is that the median elderly person in terms of
income and assets walks right onto Medicaid because of all of
the exempt assets without limit.
So really it is difficult to characterize the program as a
program for the indigent because over the years through the
intent of Congress, the program has been expanded. I call it
eligibility bracket creep to the point where virtually anyone,
if they don't plan ahead to prepare to pay their own long term
care, can get Medicaid relatively easily no matter how much
money they have.
Mr. Gowdy. My time has expired. The gentleman from
Illinois, Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman.
I think there is generally some consensus that individuals
should not gain Medicaid eligibility by inappropriately
shielding their wealth. In the studies I have looked at by GAO
as well as Kaiser, and some others, it would suggest to me that
the numbers of individuals who are able to shield large wealth
portfolios is relatively small.
Could I ask if your experiences would indicate that that's
the way it goes? Are we finding large numbers of individuals
who are millionaires or close to who have large sums who are
able to get around the requirements and are inappropriately
receiving Medicaid benefits?
Mr. Moses. Mr. Davis, as I just explained, the egregious
Medicaid planning of the millionaires, that is just the tip of
the iceberg. What GAO looked at was just one technique of
Medicaid planning, transfer of assets. That is not even the
most common form of Medicaid planning. There are annuities,
life care contracts, the reverse half a loaf strategy using
promissory notes. There are any number of ways to get people
qualified, but the transfer of assets technique, minor as it
is, is still a $1 billion a year according to GAO.
As I can't reiterate enough, the real problem is that most
people don't have to use fancy legal planning because they are
eligible anyway. This has the effect of having sent the message
since 1965 when Medicaid became part of the law to the public
that you can ignore the risk of long term care, you don't have
to save, invest or insure for the risk, and when the time
comes, may be you die with your boots on and you are home free,
but if you do get one of the chronic illnesses of old age--
Alzheimer's, Parkinson's and stroke--and you need the expensive
care, families who provide 80 percent, as you said in your
opening remarks, 80 percent of the care for free, if you have
to have the expensive care, then virtually everyone ends up on
Medicaid.
The program cannot sustain that weight now so the secret is
to target it to the people who need it most and thereby insure
a quality safety net for the truly indigent.
Mr. Davis. Mr. Dorfman.
Mr. Dorfman. Millionaires don't want Medicaid. Millionaires
still have other law planning issues but not Medicaid planning
issues. They want fancy care, they want care that they control.
They want to be able to fire the people they don't like and
hire the people they do like. Millionaires never come in for
Medicaid planning. They do want planning, they do need
surrogate decisionmakers as they suffer the illnesses of aging,
but they don't want Medicaid.
Ms. Eulau. We find that about 60 percent of the people that
come in for nursing home care have done some type of Medicaid
estate planning. Suffolk County is a fairly affluent county in
New York State. That is what we are seeing.
In terms of people receiving long term care in the
community, we don't see it as often but we still are seeing it
because transfers, if you transfer your money out of your
control for community long term care, there is no penalty. We
are seeing that as well, may be about 15 percent of the cases.
As soon as I joined AARP, I started receiving invitations
in the mail to come to free seminars to talk about Medicaid
estate planning.
Mr. Davis. Ms. Hamos.
Ms. Hamos. Congressman Davis, what we are finding in
Illinois is that this is more of a middle class family issue
than millionaires. I agree with Mr. Dorfman that the
millionaires don't want to live in our Medicaid nursing homes.
I think that what we are seeing is that middle class families,
say if there is a savings, a little pot of money of $100,000,
somewhat modest by some peoples' standards, the family doesn't
want all of that to go into nursing home care and it is eaten
up almost immediately in nursing home care.
That is why in Illinois what we are struggling with our
legislative rulemaking committee is that there seems to be this
widespread acceptance of that on behalf of middle class
families and that is who they are representing but we are
learning from other States and we really want we think there
are reasonable ways to impose and tighten the eligibility rules
that we need to put in place immediately while also maintaining
a better service delivery system and reducing the cost of long
term care generally.
We are trying to do it at both ends because there are so
many costs for low income people that are wasteful and
unnecessary. We could do a better job just by revising and
reforming our service delivery system.
Mr. Davis. Thank you very much. I yield back, Mr. Chairman.
Mr. Gowdy. I thank the gentleman from Illinois.
The gentleman from Arizona, Dr. Gosar.
Dr. Gosar. Mr. Dorfman, can you please give me the typical
assets of a client that would qualify for Medicaid that comes
to you?
Mr. Dorfman. A typical client that comes to me has a home,
a co-op, a condominium worth approximately $500,000; they have
approximately $100,000 in retirement savings; they are a
married couple and they have approximately $30,000 in cash
assets.
Dr. Gosar. Ms. Eulau, would you kind of agree with some of
those, could you confirm those?
Ms. Eulau. We are seeing assets much greater than that.
People often come and have total resources of over $300,000-
$400,000 total beyond their home, beyond prepaid burial
expenses, beyond those things they are allowed to have. In New
York, we take the Federal resource standard, choose the highest
resource standard for the community spouse in a nursing home
care situation. They are allowed to keep $109,000 of the
combined resources and we very often find that it is
significantly higher than that.
Probably most of the people that do some kind of Medicaid
estate planning could at least pay for 3 to 6 months of care on
their own and many could pay for 2 years or more.
Dr. Gosar. Staying with you, when you see someone that
genuinely needs Medicaid long term care and cannot afford it,
do you see an average person come in like that? How many times
do they not qualify or not get it? Do you see someone like
that?
Ms. Eulau. That should qualify for resources that don't get
it?
Dr. Gosar. Yes.
Ms. Eulau. No, we don't. If they qualify, they would be
receiving it.
Dr. Gosar. Ms. Hamos, you talked about the rebalancing
aspect of care. Can you tell me a little bit more about that,
kind of like a home care aspect and what's your idea and kind
of give me some balance about why that would reduce the cost of
long term care?
Ms. Hamos. In Illinois, we really do have this
institutional bias. I guess again, there are some powerful
special interests behind maintaining State operated facilities
as well as nursing homes and that is why we really did over
invest in those over time that we have 15,000 empty nursing
home beds right now. We paid three times as much at least to
maintain someone per month in a nursing home bed than what we
are providing with a limited set of services for seniors who
stay at home.
What we are really working on now is looking at how we
could increase the package of services to keep people in their
home to keep them from having to go into nursing homes which is
obviously a much more expensive form of long term care.
Dr. Gosar. If we paid for this rebalancing, can you
actually cite examples that would actually show us that we save
money?
Ms. Hamos. Yes. We will be able to.
Dr. Gosar. We would be able to. Is there something right
now you can point to, a State that actually shows we save
money? It seems to me there isn't. Actually, there isn't, is
there, because we can't find it. What we will actually do in
rebalancing is open the exposure to more expenses for folks at
home.
Ms. Hamos. That hasn't been our experience yet. We are
putting place a different kind of system and the kind of
services people need in their home. Yes, sometimes it is very
expensive to keep people in their homes, people who are really
chronically ill or have very severe disabilities but there are
people who can maintain themselves in their home and have a
higher quality of life, at a much reduced cost, and we are
going to show not just cost neutrality but real savings in this
arena.
Dr. Gosar. But it doesn't exist.
Mr. Moses, can you actually answer that question too?
Mr. Moses. I am not aware of any State that has actually
reduced the cost of long term care due to rebalancing. There
are certain countervailing factors to consider such as people
would rather get their care at home. You make a popular form of
service delivery available under Medicaid, it creates a
stronger incentive for people to find ways to qualify, not to
say we shouldn't provide home and community-based care. We
should but you need to understand why we have an institutional
bias in long term care.
That is because Medicaid made nursing home care free in
1965 and resulted in there being no market for privately
financed home and community-based services. That is why that
infrastructure isn't out there. It is why we are trying to
retrofit the home and community-based system on a nursing home-
based system funded by welfare which never has enough money to
provide adequate financing.
So it is I think not a very satisfactory solution to expand
home community-based care under Medicaid unless and until you
get the eligibility hemorrhage that this hearing is about under
control. Otherwise, you will just create more and more
incentives for people to rely on Medicaid.
The best way to get access to home and community-based care
is to be able to pay privately. Then you get red carpet access
to the best possible care.
Dr. Gosar. It is more about the qualifying than anything?
Mr. Moses. Yes.
Mr. Gowdy. I thank the gentleman from Arizona.
I would now recognize the gentleman from Maryland, the
ranking member of the full committee, Mr. Cummings.
Mr. Cummings. Thank you, very much.
Ms. Hamos, in Maryland there is an organization in my
district, Visiting Nurses Association, you know you might want
to credit them that has home care. That is what they do. They
are one of the few organizations in Maryland who are increasing
jobs by leaps and bounds because they are saving people money,
allowing people to stay in their homes and most of these people
are seniors. So it does work. I just visited them about 2 weeks
ago. We just have to be innovative and I think you are going in
the right direction.
Mr. Moses, so you would have the government pay less money
with regard to Medicaid and then for patients to do what? What
would you have them do? Be brief because I have a lot of
questions.
Mr. Moses. You have scarce public welfare resources
available. All I am suggesting is that you target them to the
people who are most in need and create incentives for the
affluent and the middle class before they are too old to and
too infirm to plan for long term care and prepare to pay
privately so they don't become dual.
Mr. Cummings. So you would advocate for them getting
insurance?
Mr. Moses. Well there are many ways to prepare, you can
save and invest, but insurance is one way. Home equity is the
huge pot of money out there.
Mr. Cummings. With people losing their homes in my district
big time, value going down, I am not sure about that one.
I want to go back to something Mr. Davis said. He said this
is a multifaceted problem but one that we can find a reasonable
solution. I want to thank you, Mr. Chairman, for calling this
hearing, but I want us to be clear on where we are.
Mr. Moses, you were invited by the majority and your bio
states that you are the president of something called the
Center for Long-Term Care Reform. I guess this is meant to
sound like a think tank. Your bio also states that you have
testified before most of America's State legislatures,
something that think tanks often do, is that right?
Mr. Moses. Yes.
Mr. Cummings. Mr. Moses, when I asked my staff to learn
more about you, to try to understand where you were coming
from, it seems that your views are really nothing more than the
views of the insurance industry, hardly a disinterested or
objective observer. Isn't it true that the policy advocacy
center you operate is a for profit company? Is that right, is
it for profit?
Mr. Moses. Yes.
Mr. Cummings. Isn't it true that when you applied to IRS in
2000 for recognition for tax exemption, your group was told it
was better classified as a ``business league`` for the long
term care insurance industry?
Mr. Moses. No. The organization was originally certified as
a 501(c)(3) charitable nonprofit. I didn't feel I could carry
the overhead of that, so I decided to become what I call a no
profit because I just couldn't carry the overhead of being a
nonprofit.
Mr. Cummings. I understand. Isn't it true that your
organization stated in June 2000 in correspondence to the IRS
that historically all the Center for Long-Term Care Reform's
funding has been contributed by the long-term care insurance
industry? Is that right? Did you report that?
Mr. Moses. I have a membership organization, so individual
members contribute $150 a year in order to get my publication
and I have corporate members as well.
Mr. Cummings. I just want to make sure we understand who is
funding you.
Was the funding to originate the Center paid for by the
long-term care insurance industry?
Mr. Moses. Some of the funding for the Center.
Mr. Cummings. When you say some, was that 50 percent, 90
percent?
Mr. Moses. Probably most in the early stages, all the first
year and less over time.
Mr. Cummings. Isn't it true that your organization's
principal purpose is to advocate for the purchase of long-term
care insurance?
Mr. Moses. No, that is not true. If you can permit me to
answer the question fully, I will explain.
Mr. Cummings. Sure, briefly, because I have a lot of
questions and what I may have to do is just get your written
response, but I want to be fair to you.
Mr. Moses. Maybe another Member will allow me to answer
your question in such a manner that can appease you.
My roots are, sir, in government service. I was an 18 year,
U.S. Government employee. I discovered that Medicaid is
intended to be for the poor and was not being so used
effectively. I have become an advocate first as a Federal
employee working for the Health Care Financing Administration,
then for the Inspector General, writing national studies that
have led to changes in Federal law.
When I decided I couldn't get it done within the Federal
Government, I left to be on the outside but my mandate, my
mission is to preserve Medicaid as a safety net for people who
need it such as the people in this room.
Mr. Cummings. Then you and I are in agreement on that. On
that point, I have to ask you this consistently with what you
said so you can have further opportunity to explain. In a fund-
raising appeal letter, does your organization brag that it may
be ``long term care industry's top producer'' and isn't it true
that in your fiscal year 2000 fund-raising letter, you assert
``the Center would open the floodgates of demand for your
products?'' In your 2000 fund-raising appeal, you were
attempting to raise $1 million, and requested $10,000 from
brokers and $20,000 from small carriers. Will you provide this
committee with a comprehensive list of donors to your
organization?
Mr. Moses. You are talking about 11 years ago. That
organization, the Center for Long-Care Financing doesn't exist
anymore. That was a 501(c)(3) charitable nonprofit. We are now
a no-profit, as I explained, and I do not have to and will not
disclose all of my donors. Most of them, about a third, are
individuals who just believe in what we are doing and make a
contribution annually. There are corporate members, some from
the insurance industry, some from the provider industry.
Mr. Cummings. Were Charles and David Cook included in it?
Mr. Moses. No.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Gowdy. The gentleman from Tennessee, Dr. DesJarlais.
Dr. DesJarlais. Thank you, Mr. Chairman, and thanks to the
panel.
Mr. Moses, I think we will just kind of continue where we
left off there because I find this really an interesting and
important hearing. Clearly, we are facing Federal deficits that
are unsustainable. We have health care programs that are in
jeopardy whether it is Medicare or Medicaid. I think what we
are trying to do here today is preserve Medicaid for those that
really need it.
We have a large group in here who should have been very
interested in this because clearly those are the ones who need
it. For the past two decades as a primary care physician, I
have struggled with the frustration of getting care for people
who really need it and everybody knows people getting it who
don't need it. To me this hearing should be a very bipartisan
thing.
Mr. Dorfman mentioned the wife who is talking to the doctor
of a husband who has just had a stroke, wondering what do I do
and indeed, that is a frightening time. Clearly, if the
government isn't there, then what indeed does she do, who does
she turn to? Does she turn to family, does she turn to her
resources?
We are hearing talk right now that the rich need to pay
their fair share. This hearing is about people being
responsible for themselves and not relying on the Federal
Government when they can afford to do it. I applaud you and
everyone who is here today trying to solve this problem because
clearly our government cannot afford to pay long term care for
everybody in this country. We have to have a better solution. I
think that is why we are here.
Do you think it is better that people have insurance and
prepare for long term care than not?
Mr. Moses. Yes. Here is my problem. My goal is to preserve
Medicaid as a safety net for people in need. Unfortunately,
people in need don't have money to donate to organizations like
mine. The people who don't are the ones who might benefit from
a change in Medicaid policy that protects the program for the
poor.
Where would we go if there weren't a $500,000 home equity
exemption? Families would tap their home equity after age 62
through products like reverse mortgages which enable them to
remain in the home and purchase that home and community-based
care that we would rather people have.
Once home equity becomes something that is at risk in case
you have a long term care problem, once Medicaid stops being
free inheritance insurance for the baby boom generation, then
the boomers will plan ahead and will be more likely to buy the
insurance that enables them to pay privately.
If we could divert only 20 percent of the people who are
likely to become the dual eligibles that are only 15 percent of
the Medicaid population but 39 percent of the cost, 70 percent
of their costs are long term care, if we could divert only 20
percent of them from ever becoming dual eligibles, it would
save Medicaid $30 billion a year which is enough by the way to
cover the doc fix.
Dr. DesJarlais. Briefly, the way things stand now with
proper legal counsel, somebody like even Bill Gates or Warren
Buffet could qualify for Medicaid?
Mr. Moses. You could as long as you transferred all your
assets 5 years in advance.
Dr. DesJarlais. So there is means for people like that to
do it if they wanted to do that?
Mr. Moses. Yes.
Dr. DesJarlais. Ms. Eulau, how often do you think someone
who is genuinely poor, may be someone who cannot privately
finance more than a quarter or so of their long term care has
assistance qualifying for Medicaid long term care?
Ms. Eulau. I am sorry?
Dr. DesJarlais. I am sorry, that wasn't very clear. How
often do you think someone who is genuinely poor, may be
someone who cannot privately fund more than a quarter or so of
their long term care, has assistance in qualifying. How often
do they get help qualifying for Medicaid long term care?
Ms. Eulau. If they fit under the income resource standards,
they would get it all the time.
Dr. DesJarlais. Would you say that most of the individuals
in nursing homes on Long Island could privately finance at
least some of their care?
Ms. Eulau. Yes.
Dr. DesJarlais. How difficult is it to recover assets from
an estate of an individual who has used Medicaid services?
Ms. Eulau. It is very difficult, especially for spousal
refusal, once they have done the refusal and separated out the
resource, quite often if the spouse in the community does not
need care, they then transfer that money out to their children
prior to their death. We can't go after the resources if there
is still a spouse in the community and quite often they are
doing their own Medicaid estate planning.
Dr. DesJarlais. Do you get the sense that people are afraid
of the idea of estate recovery? Is that something they fear or
not?
Ms. Eulau. I don't think they think about it.
Dr. DesJarlais. I was thinking about this hearing and the
idea of getting people on insurance. I think people are very
naive. I think a lot of people think Medicare will pay for
this. Do you think this would be an area that public service
messaging, if they knew this was going away and they didn't
have this option, public serving messaging to help get people
to obtain long term health coverage might be useful?
Mr. Moses. It can't hurt but the problem is the public
doesn't fail to buy long term care insurance or plan for long
term care because they aren't aware of the problem. All the
surveys show people know it is a big risk, but they still don't
buy. Why, because ignore the risk, avoid the premiums, wait to
get sick and the government pays.
Dr. DesJarlais. So all the loopholes right now are allowing
people to skirt the system, maybe even cheat the system?
Mr. Moses. Not just the loopholes, just the basic
eligibility rules let most people on.
Dr. DesJarlais. Once again, it is a case of our government
enabling people to skirt the proper channels?
Mr. Moses. Well intentioned, perverse incentives.
Dr. DesJarlais. I yield back.
Mr. Gowdy. I thank the gentleman from Tennessee.
I would now recognize the gentleman from Missouri, Mr.
Clay.
Mr. Clay. Thank you, Mr. Chairman.
According to a 2009 report by the Non-partisan Kaiser
Commission on Medicaid and the Uninsured, the number one reason
that people who shop for but do not buy long term care
insurance is cost. In 2009, the Kaiser report found that long
term care insurance premium costs vary significantly depending
on the age of the purchaser.
For individuals aged 60 with no partner, the annual
premiums for a typical policy average $2,329. For a couple the
same age, premiums for the same policy design averaged $3,096
combined for the two people. If purchased at age 70, premiums
would cost on average $4,515 per year for an individual and
$6,010 for a married couple.
Another Kaiser study published in June of this year found
that half of all Medicare beneficiaries had incomes below
$21,100 in 2010. Furthermore, many elderly individuals are
already spending a significant amount of their income on health
expenses. In 2006, Kaiser found that 1 in 4 Medicare
beneficiaries spent 30 percent or more of their income on
health expenses and 1 in 10 beneficiaries spent more than half
of their income on health expenses.
Ms. Hamos, given that a significant number of Medicare
beneficiaries are already spending a large part of their
relatively small income on health care expenses, do you think
it is realistic to ask your average senior citizen to purchase
long term care insurance which is cost prohibitive for many?
Ms. Hamos. I think you hit the nail on the head. It is cost
prohibitive, but I think the key to long term care insurance is
that young people need to buy it when it is affordable and they
need to be thinking ahead to their own futures and their
families' futures. Young people, as we all know, don't think
that way. That is the big problem. If people wait until they
become seniors, even middle age and close to being seniors, I
think most people don't start down that road because it is very
expensive.
Mr. Clay. It is my understanding that long term care
insurance premiums have increased significantly above the
overall rate of inflation. Isn't it true, Ms. Hamos, that from
1995 to 2005, average age adjusted premiums have increased 59
percent above the overall rate of inflation for individuals
aged 55 to 64 and by 32 percent for those aged 65 to 69?
Between 2000 and 2005, the more comprehensive policies which
often included inflation protection, raised premiums on average
30 percent. Have you found that in your studies?
Ms. Hamos. This is not my expertise at all but I have read
those studies and I have learned that as well about long term
care insurance. We would all like to encourage more use of long
term care insurance quite honestly I think if it is out there.
The insurance companies tell us there is not a robust market
for it.
I think what we are hearing today is that in part because
Medicaid policy has impacted that, but I would say part of the
problem is that it is a costly purchase for a lot of low income
and middle income families and they don't really think ahead
far enough to be able to buy and hold on to it and maintain it
throughout their lives. That is why it is so cost prohibitive
and that is why it is increasing because the insurance
companies don't see a big market for it.
Mr. Clay. Thank you for that response.
Mr. Moses, I noticed that your fund-raising solicitation
ends by asserting that ``Our established credibility as an
independent third party voice allows us to perform an essential
role that no one else can fill for reasons perceived by self
interests.'' Do you normally disclose to congressional
committees and State legislatures that you have testified
before the details of your ties to the long term care insurance
industry?
Mr. Moses. It is public knowledge. As your researchers have
determined and provided you the information, that is out there.
But as I explained earlier, I am not about selling insurance. I
am about saving Medicaid. The problem is, as one of the
testimonies explained, between two-thirds and 90 percent of the
potential market for long term care insurance is crowded out by
the availability of Medicaid. That was in the American Economic
Research Journal.
As long as that is the case, as long as the public can
ignore the enormous cost of long term care, no financial
product is affordable if you don't think you need it.
Mr. Clay. Will you provide the subcommittee the names of
your corporate donors?
Mr. Moses. No.
Mr. Clay. Thank you and I yield back.
Mr. Gowdy. I thank the gentleman from Missouri.
Given the impressive panel of witnesses that we have, with
your indulgence, we would like to have a second round of 2
minutes each if that is amenable to you all. We are so
fortunate to have witnesses like yourselves. We want to be good
stewards of your time, so if you have time, 2 minutes. My
math's not great, maybe 8 minutes.
Mr. Moses, key payments, is that a phrase you are familiar
with and what is it?
Mr. Moses. The idea of key payments, the notion is that if
you are doing Medicaid planning and sheltering or divesting
hundreds of thousands of dollars, you don't want to end up in
one of those awful Medicaid nursing homes.
Mr. Gowdy. That is exactly why I asked you because there
have been two witnesses who have said wealthy people don't want
to wind up in one of those gosh awful Medicaid places. The good
news for them is there is a way around that.
Mr. Moses. Absolutely, there is.
Mr. Gowdy. Tell Mr. Dorfman how he can keep his rich
clients from having to stay in one of those horrible Medicaid
facilities.
Mr. Moses. This is routinely recommended in the Elder Law
Journal articles. Don't worry Mr. and Mrs. Client, we can get
you into a nice place because when we divest the rest of your
assets, we will hold back $50,000 to $100,000 so that you can
pay privately for 6 months to a year. Why does that make a
difference? You will get red carpet access to the best quality
care because nursing homes, for example, only get about two-
thirds from Medicaid what they would get from a private pay
resident, so they will roll out the red carpet to attract
people who can pay privately. They may have only a few Medicaid
beds and be mostly private pay and Medicare. They are the
really nice nursing homes and the Elder Law Bar always knows
which ones those are.
The problem is while the nicest beds and the best
facilities are being filled by people who could have, would
have and should have paid their own way, Medicaid people, the
appropriate indigent people, can't get into the nice places and
they end up in the 100 percent Medicaid places that are the
kind of places that 20/20 goes in with the minicams showing
people lying in their own waste with bed sores down to the
bone.
Mr. Gowdy. To summarize it, because I only have a couple
seconds, just save back enough money to be a private pay
patient for 3 months at a minimum, perhaps up to 6 months, then
quit paying your private pay, that very nice facility can't
kick you out because of your former payment, you could just
live off your Medicaid?
Mr. Moses. Correct.
Mr. Gowdy. There is a way contrary to what has been said
this morning. Wealthy people don't have to wind up in those
gosh awful Medicaid facilities, they can be at a super nice
place if they just get the right legal counsel, right?
Mr. Moses. A Medicaid planner simply flips the switch, the
Medicaid plan kicks in and your private payer becomes a
Medicaid recipient overnight.
Mr. Gowdy. I would recognize the gentleman from Illinois,
Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman.
We noticed a number of individuals here earlier in
wheelchairs who are part of the disabilities community. For a
number of years now, Senator Harkin and I have been working
very hard trying to get something passed called Community
Choice, which would allow these individuals to live at home and
still get the nursing care or the medical care they needed and
not have to live in nursing homes to do so.
Of course we have not fared very well with that
legislation. We have not been able to get it passed. Since we
are looking for ways to save money from Medicaid, what would
each one of you think of that? Would that be a way to save some
of the money we are currently spending because nursing home
care, the average cost, is about $75,000 a year. If individuals
could live at home and we pay for the medical services, then it
seems we would save a lot of money.
Mr. Moses. You would indeed target Medicaid to the people
who really need it and you will have more than enough resources
to provide a full continuum of care from home, community-based
care, assisted living and nursing home care but only when it is
needed.
Mr. Dorfman. There is a system we run through VA, the
Community Senior Foster Care Program. It is the kind of program
that could be duplicated across the entire Medicaid spectrum.
An example of what it might do is take three senior veterans
suffering from Alzheimer's and Parkinson's, put all three
together in a community setting in someone's home and pay them
for providing care. It cost a fraction of institutional care
and is a model that could be replicated across the system to
provide community care.
Ms. Eulau. New York has a waiver program, a long-term home
health care program that services clients at home, giving them
all the nursing home services they would normally get in a
facility in their home, nutrition care, therapy and such. The
program itself requires that it not cost more than 75 percent
of what it would cost in a nursing home setting. We do try to
do that.
Could I also say that I don't really think in my county
there are Medicaid nursing home facilities. All of our nursing
facilities have about 80 percent Medicaid patients.
Ms. Hamos. That was surprising to hear. Every State really
does have different experiences.
I wanted to reflect on the chairman's questioning before,
in our case in Illinois, there are some nursing homes that
actually do figure out ways to kick out people when they are
done with their resources. They figure out how to transfer them
to hospitals and then don't invite them back. It is risky to
start out in the fancy nursing home and not know where your
granny is going to be a year or 10 months later.
I would say again we think that home and community-based
care is more cost effective and a higher quality of care kind
of approach for people who are low income, disabled and that is
the preponderance of the clients we deal with. I think exactly
what Ms. Eulau was talking about is what we are finding too,
that we can set a standard for what nursing home care would
cost and go below it and meet that standard and provide a
higher quality of care.
Mr. Davis. Mr. Chairman, I have a couple questions I would
like to submit.
Mr. Gowdy. Yes, sir, without objection.
The Chair would now recognize the gentleman from Arizona,
Dr. Gosar.
Dr. Gosar. Mr. Dorfman, do you worry that Medicaid planning
exploits taxpayers?
Mr. Dorfman. No. Medicaid planning is the way to protect
the individuals who need the government program set up for
their benefit.
Dr. Gosar. So it doesn't undermine personal responsibility
and contributes to a free rider culture?
Mr. Dorfman. No, not at all. What it is doing is taking an
individual in any circumstance and looking at what are the most
responsible choices at that moment given the existing
government program. Sometimes that means transferring the money
to protect the wife who is still living at home when you need a
nursing home.
Dr. Gosar. Mr. Moses, do you worry about the exploits to
the taxpayer contributing to a free rider culture in this
Medicaid planning?
Mr. Moses. Yes. The research shows that people don't plan
for long term care because Medicaid pays for most of the
expensive care later on. It is not that the public knows all
there is to know about long term care and plans to go on
Medicaid, it is the fact that Medicaid has always paid for most
expensive long term care that has kind of desensitized the
public to the risk.
That is why all the survey studies show that people are
aware that they should have a plan for long term care but they
think Medicare covers it which doesn't, but Medicaid does and
that is the simple, basic fact that is you could change that,
we could preserve Medicaid as a safety net for people in need
and if you had to spend some of your own resources before you
got help from the government, as you do in England, England
only protects $38,000 worth of all assets including home
equity. If you had that in place, then you would have a demand
for planning, saving, investing and insuring.
Dr. Gosar. Ms. Eulau, how would you feel about that?
Ms. Eulau. I agree that people don't know enough before
they get to that point in their lives about what is going to
pay for their care, so I really think there needs to be a lot
more education out there. I see commercials every day for
Medicaid estate planning on the television and in print. Like I
said, I received free seminar invitations myself just as an
AARP member in the community. I think there needs to be more
education.
The other thing is it really could teach people who is
paying for it and I think once people find out that the
taxpayer is funding wealthy recipients of care, there's going
to be some changes.
Dr. Gosar. I just want to say I have heard some things here
today. I was raised from immigrant grandparents. The American
dream was about personal accountability and personal
responsibility. When did we lose honor, when did we lose ethics
and when did we lose character? What I have heard today
astonishes me.
In the other aspect of selling insurance, what is so wrong
about selling an insurance plan for somebody to take care of
themselves? What is wrong with that?
I am from Arizona and I have seen a group of people who
have been on the government dole for the longest period of time
fighting to get off it and that is Native Americans. Something
is wrong with government provided health care when it can't
look at these aspects.
I look at Ms. Hamos, we had DRAs that we were supposed to
follow and we are still not there because it is a bipartisan
problem. Something is wrong here and we have to look at the
whole core. It started in 1965 when we did not identify those
proper rules, proper protocols and etiquettes. I am
apologizing.
Thank you.
Mr. Gowdy. I thank the gentleman from Arizona.
The Chair would now recognize the gentleman from Missouri,
Mr. Clay.
Mr. Clay. Thank you, Chairman Gowdy.
Mr. Moses, going back to the point about the names of your
corporate donors, I just don't find you as a disinterested,
public policy expert expressing a personal opinion but in fact,
a paid, long term care industry advocate. In the interest of
full disclosure, why wouldn't you want to provide the names of
your corporate donors to this subcommittee?
Mr. Moses. I am not required and I choose not to do it. The
point is that kind of argument, Congressman Clay, is a logical
fallacy. It is called the ad homonym to attack somebody based
on aspects other than the quality of their work. I would
encourage you to read the many reports that are on our Web site
and make a judgment based on facts and not personal attacks.
Mr. Clay. Mr. Moses, before I came here, I was a State
legislator for 17 years and I see the trends of what is going
on in the States, that they are quickly shirking their
responsibility to take care of the disabled and the people that
are older because, first of all, they don't want to raise the
necessary revenues to pay their share of Medicaid and are
putting less and less in annually to pay for those people who
helped build those States and build this country, especially
our seniors who happen to be in a long term care facility. You
don't want to provide the subcommittee with full disclosure for
whatever reason.
Mr. Moses. I spent 30 years, my career, trying to find ways
to save Medicaid for people in need. The only tools I have are
private sector industries that stand to gain from a system that
would save Medicaid for people in need. If we save Medicaid for
people in need, others, the more affluent people, will need to
spend their money instead of hiring attorneys.
They will need to use their home equity through things like
reverse mortgages so they can get quality care in the private
market. Once their home equity is at risk, they will see the
need to buy the insurance and we will take some of the burden
off the public programs currently unable to provide guaranteed
access to quality care across the whole spectrum of care for
people truly in need and we will increase the jobs in the
private sector and the tax revenue that enables Congress to do
worthwhile things. Right now, we are operating a system that
does not achieve its original intent.
Mr. Clay. I thank you for your response.
Mr. Gowdy. I thank the gentleman from Missouri and on
behalf of all of us, we want to thank each of our panelists. It
has been informative for all of us and we appreciate your
expertise, your professionalism and how you interacted with one
another and especially how you have interacted with
questioners.
With that, the committee is adjourned and we thank you
again.
[Whereupon, at 11:40 a.m., the subcommittee was adjourned.]
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