RALEIGH – If you thought Medicaid was simply a welfare program designed to provide free in-kind services to poor people, let me put something on the top of your reading list.
It is a new paper for the John Locke Foundation by Stephen Moses, a former official of the U.S. Department of Health and Human Services. Moses has had long experience working for and with the Medicaid program, and an uncommon understanding of its history, cost structure, and design peculiarities. In his JLF paper, Moses looks at North Carolina’s spending on long-term care – a term that encompasses nursing homes, home health care, personal care, and other services extended most often to the elderly and disabled component of the Medicaid caseload.
Just as Medicaid is the single biggest cost-driver in North Carolina’s growing state budget, long-term care is the single biggest cost-driver within Medicaid, accounting for 33 percent of its total expenditures and the largest share of its recent increase in cost. What are the dollar amounts involved here? We’re talking nearly $3 billion in annual Medicaid spending on long-term care, up 45 percent in just five years.
This is a huge expenditure. It dwarfs much of what politicians in Raleigh tend to talk about. As serious a violation of the public trust as wasteful pork-barrel projects and egregious corporate-welfare deals are, recent growth in Medicaid spending on long-term care is a bigger deal – and a bigger problem.
It’s not a problem, of course, that families naturally want to secure the best-possible care for their aging parents, injured siblings, and disabled children. Nor is it a problem – it’s really quite delightful – that recent advances in diagnosis, surgery, pharmaceuticals, and medical devices have provide life-extending benefits to people who might, in a previous generation, have passed away suddenly without extended periods of long-term care.
The problem is that many North Carolinians have an outdated picture in their heads of what Medicaid truly is. They believe it is a safety-net program for the destitute. In the context of long-term care, however, Medicaid has become not a safety net but an asset-protection device – a sort of inheritance insurance for middle-class (and sometimes even wealthy) families who don’t feel obligated to use their parents’ assets to pay for their parents’ health care.
Thanks to nebulous laws, lax regulations, and the perfidy of the some of the smarmiest lawyers I’ve ever met, it remains easy for families to game the Medicaid system. Even though Congress passed a law in 2005 cracking down on some of the most obvious and abusive practices, North Carolina has yet to implement the new rules – and, unfortunately, the new rules are themselves insufficient to the task of restricting Medicaid services to the truly needy. In theory, Medicaid is empowered to recover the cost of long-term care from the estates of deceased beneficiaries. But because of generous exemptions of home equity from asset recovery – half a million dollars, once North Carolina implements the law – as well as such tricks as prepaid burials, auto exemptions, and early gifts, Moses writes, “nursing-home benefits under its Medicaid program will be readily available to most residents of the state without significantly spending down their assets.”
As North Carolina’s population ages, the cost pressure of essentially promising free long-term care to middle-income families will crush the state budget in its current form. Over time, the expense will either eat into true state responsibilities or lead to major tax increases.
More important than the fiscal cost, I would argue, is the moral one. Just as it is primarily a parental responsibility to take care of their minor children, it is primarily the responsibility of adult children to take care of their elderly parents or disabled family members. These are the familiar ties that bind, the relationships that form stable societies of free and independent citizens who plan ahead for the future and don’t force others, at the point of a gun, to relieve them of financial responsibility.
Again, we’re not talking about a poor person, without means or family support, who develops a chronic illness and ends up on the state dole because there’s nowhere else to go. We are talking about families spending many years and thousands of dollars structuring their finances to save tens or even hundreds of thousands of dollars when the nursing-home bills come due.
What can be done? Moses sketches out an action plan. First of all, if North Carolina would merely adopt the standards and enforcement practices of the most-successful states, such as Oregon and Idaho, the state could save $60 million a year in Medicaid costs. Beyond that, however, North Carolina politicians need to join with their peers from other states to demand that Congress rewrite the law to restrict Medicaid eligibility to the truly poor, giving the rest of us the proper incentives to save, buy private long-term care insurance, and tap home equity when the need for long-term care arises.
Perhaps Moses’ most-challenging recommendation is this one: “Educate state legislators and policymakers about the importance of preventing Medicaid from becoming free inheritance insurance for baby boomer heirs.” You know, you can lead a horse to water . . .
Hood is president of the John Locke Foundation.