RALEIGH – With counties across the state begging for relief from the burden of financing Medicaid and the state budget itself absorbing hundreds of millions of dollars in higher Medicaid costs just in the past couple of years, it would seem that North Carolina should be leading the way in pursuing fundamental changes in the program. State policymakers have adopted a few reforms, welcome ones, but none has represented the kind of structural adjustment that will generating big and lasting savings.
One defense from state officials that I entirely agree with is that federal law continues to constrain how far states can go in Medicaid reform. There are caps on copayments and other cost-sharing strategies, for example. And in another critical area, long-term care, federal Medicaid rules are still far too permissive in letting middle-income and even wealthy people foist the cost of their nursing-home care on taxpayers without having to give up their homes and other assets.
Let’s be clear about this: Medicaid was never intended to serve as inheritance insurance. There is an entire industry of lawyers, accounts, and consultants, however, who routinely help their clients accomplish exactly this objective. They urge families to shift assets around, even divorce if necessary, to ensure that homes, cars, and other financial resources never have to be tapped for long-term care expenses. It’s an elaborate debt-avoidance scheme, if the truth be told, and it is an entirely unsustainable trend as the population ages and a larger proportion of adults is retired and receiving long-term care in some form (though not necessarily in a nursing home).
Federal law may put unwise restraints on asset recovery in the Medicaid program, but that doesn’t mean that North Carolina has no avenues available to take meaningful action. A new report from the American Association of Retired Persons (AARP) on the extent of asset-recovery programs in the 50 states shows that North Carolina is no leader on the issue.
During the most recent year for which data were available (FY 2003), North Carolina initiated only 1,000 attempts to recover Medicaid expenses from estates. The total take was just $5 million, yielding an average collection per attempt ($5,000) that was slightly less than the national median and about $3,000 less than the average (a few states with large average collections, such as Washington at $18,000, pulled up the average). As with all data, you have to interpret the AARP’s report carefully. Some states that are relatively aggressive at asset recovery, such as Oregon, appear to have a low recovery average, but that’s because they go after many more estates (Oregon initiated recovery more than seven times as often as North Carolina did).
Perhaps a better way to think about it is that a number of states with comparable or smaller populations – Washington, Oregon, Wisconsin, Massachusetts, and Iowa among them – collected two, three, or four times as much Medicaid expenses from estates than North Carolina did. We won’t “solve” our Medicaid crisis by saving another $10 million or $15 million this way, but it certainly won’t hurt.
Ultimately, Congress will have to send a clear message that Medicaid will not be able to pay for the long-term care expenses of anyone who is not truly destitute, abandoned, or homeless. Americans need to buy long-term care insurance, build their savings, and otherwise take responsibility for their own family’s needs. There’s really no choice here.
Hood is president of the John Locke Foundation.