As of mid-June, one quarter of all COVID-19 deaths, 30,784, occurred among people living in nursing homes. Stephen Moses, president of the Center for Long Term Care Reform, says he is not surprised by this outcome, as Medicaid now pays the bill for more than 62 percent of nursing home residents. An estimated 1.3 million people reside in American’s 15,600 nursing homes. A more extensive interview with Stephen Jones can be heard on The Heartland Daily Podcast.
Health Care News: Is it accurate to describe care in nursing homes as substandard?
Moses: I’d say that statement is accurate and recognized by most economists and other analysts. Medicaid reimburses nursing homes only about 80 percent of the private-pay rate and often less than the cost of providing the care, according to the American Health Care Association. Consequently, nursing homes heavily dependent on Medicaid have difficulty hiring and retaining enough quality caregivers at the very low salaries they can afford to pay. Having inadequate caregiving staff is closely associated with lower care quality ratings.
Health Care News: How much does Medicaid pay for long-term care, and what should it reasonably cost?
Moses: According to Genworth’s 2019 cost of care survey, the average private-pay monthly nursing home cost for a semi-private room is $7,513, and $8,517 for a private room. Costs in expensive urban areas can easily be half again as much or even double.
As Medicaid pays about 80 percent of the private-pay rate, it would pay about $6,010 on average for a semi-private room. Medicaid would rarely if ever pay for a private room.
Health Care News: Who qualifies for Medicaid?
Moses: Medicaid long-term care eligibility was originally available to almost anyone who applied. Transferring assets to qualify was explicitly permitted until 1980. Since then, elastic income and asset eligibility rules have allowed the middle class and affluent to qualify for what was originally intended to be a poverty program. There is literally no limit on income if your medical and long-term care costs are high enough.
Assets are also practically unlimited, with home equity exempt between $595,000 and $893,000. Many other resources are exempt with no dollar limit, such as a car, term life insurance, individual retirement accounts, one business including the capital and cash flow, and personal belongings and home furnishings, including heirlooms. Generous matching funds from the federal government encouraged state Medicaid programs to maximize their grants almost without limit. Naturally, Medicaid expenditures exploded.
Health Care News: Does Medicaid require any income to cover care?
Moses: Most people on Medicaid have some sources of personal income, nearly always Social Security, at least. Medicaid requires that all income except for a tiny personal-needs allowance must be used to offset the program’s cost for their care.
For example, a person with several thousands of dollars’ worth of income from Social Security, a private pension, an exempt business, etc. qualifies for Medicaid nursing home benefits because their income is less than the cost of the nursing home. But once on Medicaid, they must pay most of that income back to the nursing home, reducing Medicaid’s liability.
There are even cases where the Medicaid recipient’s income covers the entire cost of the care at the Medicaid rate. This is very important because it shows, one, that Medicaid recipients get a substantial discount on the cost of their care; two, nursing homes end up with more low-pay Medicaid recipients and fewer higher-pay private patients, which impairs their ability to provide quality care; and, three, state and federal Medicaid programs subsidize welfare dependency at the expense of nursing home providers’ financial viability.
Health Care News: Given that nursing homes are under financial pressure to provide top care, why do families find it acceptable to use Medicaid to pay for it?
Moses: Few people plan to rely on Medicaid, but most end up there if and when they need high-cost care for an extended period. The dynamic works like this. People don’t worry or plan for long-term care because Medicaid has always been there as the safety net for poor, rich, and in-between. Once they need expensive care, the path of least resistance is to qualify for Medicaid. That’s the only way to preserve wealth and heirs’ inheritances, which makes the program’s access and quality downsides more tolerable.
Thousands of elder law attorneys across the country use sophisticated legal techniques to qualify affluent clients while preserving enough “key money” to buy their way into the higher-quality, lower-Medicaid-census facilities.
Health Care News: Does Medicaid make long-term care more equitable? In other words, are people treated alike regardless of income?
Moses: This key money buys access to the best nursing homes with the fewest Medicaid beds. After a few months, the attorney flips the switch, and voila, Medicaid picks up the tab going forward. Tragically, poor people don’t have key money, so they end up in the 100 percent Medicaid hellholes.
Health Care News: What impact has this system had on the private market? What about long-term care insurance?
Moses: You can’t sell apples on one side of the street when they’re giving them away on the other. Easy access to Medicaid after the insurable event has occurred was the biggest obstacle to private long-term care insurance. The federal government added insult to injury by artificially forcing interest rates to nearly zero, making it impossible for insurance carriers to get adequate returns on their reserves. That forced the carriers to raise premiums, which enraged policyholders and repelled future prospects.
Congress should remove the perverse incentives in public policy that discourage responsible long-term care planning. Individuals should wake up to the reality that to avoid Medicaid and its nursing home trap, they must plan early and save, invest, or insure so if and when they need extended, expensive long-term care, they can pay privately for it. Money talks, and it opens doors to the best long-term care in the most desirable venue, usually one’s own home.
“Why Nursing Homes are Pandemic Hotbeds (guest: Stephen Moses), The Heartland Daily Podcast, July 7, 2020: https://www.heartland.org/multimedia/podcasts/why-nursing-homes-are-pandemic-hotbeds-guest-stephen-moses