On June 28, the Senate Special Committee on Aging held the first in a series of hearings to examine the future of the Medicaid program. In his opening remarks, Chair Gordon Smith (R-OR) explained that “the purpose of this hearing is to learn about a fundamental aspect of the program the use of ‘mandatory’ and ‘optional’ populations and benefits.” He added, “To some, these categories simply mean that those who are considered a mandatory population should receive care through Medicaid and that those who are optional probably have other alternatives and don’t really need Medicaid’s help. Well, by the end of this hearing I believe we all will learn that isn’t necessarily the case. In fact, if we allow optional beneficiaries to lose Medicaid coverage, they will simply join the ranks of the millions of uninsured Americans and end up costing taxpayers far more in the long run.”
Executive Vice President of the Henry J. Kaiser Family Foundation Diane Rowland addressed the multiple roles of Medicaid, stating that it “is the source of health insurance coverage for 40 percent of poor Americans and one in four American children, finances health care coverage for about 20 percent of people with severe disabilities and 44 percent of people living with HIV/AIDS, supplements Medicare for 15 percent of Medicare beneficiaries, and helps pay for the care of 60 percent of nursing home residents. In meeting these health needs, Medicaid accounts for nearly one of every five dollars of health care spending, nearly one of every two dollars spent on long-term care, and over half of public mental health spending.”
Explaining how the program is structured, Ms. Rowland said, “States that elect to participate in Medicaid (currently all states do participate) are required to cover all children under the poverty level, pregnant women and children under six with incomes at or below 133 percent of the federal poverty level, and most elderly and disabled recipients of cash assistance under the Supplemental Security Income (SSI) cash assistance program. Because the federal statute requires states to cover these groups as a condition of participating in Medicaid, they are referred to as the ‘mandatory’ eligible groups.’” She added, “Beyond the federal requirements, states have the option to extend coverage to children at higher incomes, their parents, and other low-income elderly and persons with disabilities in the community and in nursing homes and still receive federal matching funds for the cost of their coverage. These groups are referred to as ‘optional’ populations because states are not required to cover them.” With regard to Medicaid benefits, Ms. Rowland said that states “must provide physician services, hospital care, nursing facility care, and other ‘mandatory’ services to beneficiaries covered at state option, but they can also provide an array of ‘optional’ services to both mandatory and optional populations. Services offered at state option include prescription drugs and a broad range of disability-related services, such as case management, rehabilitative services, personal care services, and home and community-based services.”
Ms. Rowland expressed her opposition to reform proposals that would increase state flexibility to impose cost-sharing or scale back benefits in the Medicaid program: “State flexibility without additional federal resources does not provide a painless solution to the fiscal pressures facing Medicaid. These short-term strategies will not achieve significant savings for states or facilitate Medicaid’s ability to meet the health needs of the low-income population and adequately pay their providers nor will they help address the increasing long-term care needs of an aging population. Instead they will further increase the number of uninsured Americans and shift more costs to doctors and other health care providers who care for Medicaid patients.” She added, “Long-term strategies that invest in Medicaid to promote better management of chronic illness, disease prevention, and coordination with Medicare to more effectively address the needs of the high cost enrollees who rely on both programs offer a better and more humane alternative for containing costs.” Ms. Rowland also noted that Medicaid reform “should be directed at finding ways to support and maintain the coverage the program offers while balancing the responsibilities for coverage and financing between the federal and state governments. Assuring that financing is adequate to meet the needs of America’s vulnerable and addressing our growing uninsured problem should be among our nation’s highest priorities.”
Howard Bedlin, vice president for public policy and advocacy at the National Council on the Aging, addressed the importance of Medicaid for women: “Most of the seniors on Medicaid are women. The average woman over age 65 lives six years longer than the average man. As a result, she is often widowed and living alone. According to the Older Women’s League (OWL), older women have [an] average annual income of $15,615 compared [to] over $29,171 for men, with correspondingly lower assets. Not surprisingly, over 70 percent of adults ages 19 and older on Medicaid are women. The reality is, the typical senior on Medicaid is a very poor, chronically ill widow.”
Expressing his concern that some reform proposals have suggested cutting benefits for optional populations, Mr. Bedlin said that Medicaid “pays for an estimated 43 percent of our nation’s long-term care costs more than any other source. In 2001, 57 percent of total Medicaid spending for optional populations and services was for long-term care. Of the $83 billion Medicaid spent that year for long-term care, fully 85 percent of the amount was for optional populations and services.” He encouraged Congress to provide incentives for reverse mortgages, which would allow seniors to liquidate a portion of their home equity for long-term care costs: “Payments from a reverse mortgage can help reduce dependence on Medicaid and reduce the risk of institutionalization. Increased use of this financial option for long-term care could result in savings to Medicaid ranging from about $3.3 to almost $5 billion annually in 2010, depending on market penetration rates increasing from 4 percent to 25 percent of older homeowners.”
Mr. Bedlin also noted that under current law, while Medicaid will allow a spouse who does not need long-term care benefits to retain 50 percent of the couple’s assets by providing mandatory spousal protection for nursing facility services, the program only provides optional protection of a spouse’s assets for the Home and Community-Based Services (HCBS) waiver program, and no protection of a spouse’s assets under the personal care services program: “The failure to provide spousal protections can bankrupt a healthy spouse or split families apart, providing incentives for divorce, lawsuits and other serious conflicts. We need a more family-friendly policy. States should be given the flexibility to provide spousal impoverishment protections under the personal care services program. In addition, incentives should be created for states to provide spousal protection under both the personal care and HCBS waiver program.”
On June 29, the Senate Finance Committee held a hearing on Medicaid and long-term care.
Testifying on behalf of the American Council of Life Insurers, Joyce Ruddock said that “one of the greatest risks to asset loss in retirement is unanticipated long-term care expenses,” adding, “Over half of women and nearly one-third of men 65 and older will stay in a nursing home sometime during their lifetime. The annual cost of a nursing home stay averages $70,000 and is projected to reach $241,000 by 2030.” She explained that long-term care insurance has become increasingly popular in the past few years, pointing out that “in 2004, long-term care insurance carriers paid more than $2.1 billion or a 20 percent increase from 2003, in long-term care insurance benefits.” She also noted that most insurance policies “allow customers to choose between in-home care, assisted living facilities and nursing homes, encouraging the individual and their families to customize his or her care needs.”
Ms. Ruddock encouraged Congress to approve the Long-Term Care and Retirement Security Act (S. 1244) sponsored by Committee Chair Charles Grassley (R-IA). The measure “provides individuals with a phased-in above-the-line federal income tax deduction for the eligible portion of the premiums they pay to purchase long-term care insurance…In addition, the measure would permit long-term care insurance policies to be offered under employer-sponsored cafeteria plans and flexible spending accounts; and would clarify that a qualified long-term care policy could be exchanged tax-free for another qualified long-term care policy better suited to the insured’s needs. Finally, the bill includes a phased-in tax credit to individuals with long-term care needs or their caregivers of up to $3,000.” She also urged Congress to expand the Partnerships for Long-Term Care, a pilot project that allows consumers to purchase a long-term care insurance policy and then qualify for Medicaid once the benefits in the policy have been fully exhausted. Explaining that the program currently operates in California, Connecticut, Indiana, and New York, Ms. Ruddock said that “more than 200,000 long-term care insurance Partnership policies have been purchased in those states, and less than 100 policyholders have exhausted their policies and accessed Medicaid.”
Judith Feder, dean of the Georgetown Public Policy Institute, addressed the limitations of long-term care insurance, specifically that it is not available to seniors who already have long-term care needs, it is not affordable to low- and moderate-income individuals, and it does not provide adequate benefits to protect individuals from catastrophe. Citing a Congressional Budget Office report on long-term care, she explained that proposals to encourage individuals to purchase long-term care insurance “would likely increase insurance premiums,” adding, “The result might be better protection for those who can afford private insurance a worthy goal, but it is highly unlikely to be an increase in the numbers of people willing or able to buy insurance.” Ms. Feder also noted that the Partnerships for Long-Term Care “have been advocated as a means to save Medicaid money by preventing ‘spend-down’ and asset transfers. The hope is that allowing the purchase of asset protection, along with insurance, will encourage modest-income people to purchase private long-term care insurance. Experience with these policies in four states has produced only limited purchases, primarily among higher-income people, and has affected too few people for too short a period to assess its impact on Medicaid spending.” Expressing her opposition to tax credits for long-term care insurance, she stated, “Experience with health insurance tells us that such credits are likely to primarily benefit those who would have purchased long-term care insurance even in the absence of credits substituting public for private dollars and, as currently proposed, are not even designed to reach the substantial portion of older and younger Americans with low and modest incomes.”
Offering suggestions on how the federal government can help pay for long-term care, Ms. Feder said that “one option, modeled on Social Security, would be to provide everyone access to a ‘basic’ or ‘limited’ long-term care benefit, supplemented by private insurance purchases for the better-off and enhanced public protections for the low-income population,” adding, “Another option would be [the] establishment of a public ‘floor’ of asset protection a national program assuring everyone access to affordable quality long-term care at home as well as in the nursing home without having to give up all their life savings as Medicaid requires today. The asset floor could be set to allow people who worked hard all their lives to keep their homes and modest assets, while allowing the better-off to purchase private long-term care insurance to protect greater assets.” Ms. Feder argued that either option “could not only better protect people in need; it could also provide substantial relief to states to focus on health insurance, education and other pressing needs relief that governors have explicitly requested by calling on the federal government to bear the costs of Medicare/Medicaid ‘dual eligibles.’”
