The aging of our population coupled with current federal and state budget deficits portends trouble in the coming decades. In 2002, roughly 12.4 percent of Michigan’s population was age 65 or older. By 2020, that number is expected to go to 16.9 percent, representing a 36 percent increase. Clearly, government continues to carry the bulk of the load when it comes to paying for long term care. Medicaid covers two-thirds of all nursing home residents.

For the immediate future, Michigan, like most states, is facing fiscal problems of unprecedented proportions. Until revenues recover, states will be forced to consider cuts in every area including Medicaid spending. Increasingly, long term care will be scrutinized for budget savings. Unless there is meaningful fiscal relief at the federal level, states will be unable to sustain the fiscal burden of Medicaid in the long run, and budget driven program reductions can be expected to continue.

STATE REACTION

Between 2002 and 2004 at least 19 states implemented programs to reduce long term care spending. Basically, the programs were aimed at lowering reimbursement levels for nursing homes and tightening eligibility and funding for home and community based services. These changes no doubt made access to care more difficult in these states, and threaten the quality of care. Other states have taken a more aggressive approach to limit or prevent the asset transfer techniques described in Chapter Six, and have implemented estate asset recovery. As noted, Michigan recently enacted new medical eligibility standards in an attempt to reduce the number of citizens eligible to enter the nursing home at government expense.

Budget cutbacks directly impact the availability and quality of care. To be assured of receiving quality care, consumers will need to educate themselves as to their options and rights. The educated consumer will be much more likely to find quality care and scarce government subsidies. Unless there are dramatic changes in the long term delivery system in the U.S., uninformed consumers will face long waiting lists and receive sub-standard care.

ESTATE RECOVERY

Since 1993, Federal law has required Michigan to seek reimbursement of its Medicaid expenditures from the estate of deceased recipients. The amount the state is required to recover is the full cost of Medicaid provided nursing home care, MI Choice expenditures, hospital care and prescription drugs. Each state is free to define estate as it sees fit. Some states limit the definition to the decedent’s probate estate while others have adopted a broader definition that includes all assets of the decedent, including jointly held property and property owned in trust.

Despite the federal mandate, Michigan is the only state in the country that has not implemented an estate recovery program. To date, no Michigan legislator has wanted to pass legislation to confiscate grandma’s house. It seems, however, that political and budgetary pressure is mounting to implement some form of estate recovery in the near future. The exact form of the legislation – how it will define estate, and whether the state will use liens to secure the Medicaid recipient’s obligation – is unclear. Once passed, informed families will no doubt structure their assets to minimize the impact of estate recovery.

Estate recovery has proven to be an extremely poor source of revenue for those states that have implemented estate recovery programs. The national average for estate recovery is less than one tenth of one percent of total Medicaid expenditures. Certainly, estate recovery will not cure the current Medicaid crisis in this country.

Needless to say, the rules and planning techniques described in Chapter Six are subject to change. Although unlikely, some of the changes could be made retroactively, affecting planning already in place.

You should seek qualified professional help from an elder law attorney when you engage in any form of Medicaid planning, and review that planning regularly.

You should also seek help when making application for Medicaid to ensure that your application is accurate and correct. False information can result in Medicaid disqualification or even criminal penalties.

MOVE TO MORE IN-HOME COMMUNITY BASED CARE

One solution is for states to overcome the institutional bias and focus on in-home and community based care. States like Oregon, Washington, Colorado, Vermont and Arizona have demonstrated that they can stretch their Medicaid dollar by providing greater access to home and community-based care.

Nationally, Medicaid spending on nursing homes per capita was $154 in 2003 as compared to $95 for home and community-based services. Nonetheless, approximately two-thirds (67%) of Medicaid long-term care funds go toward institutional care.

The trend toward in-home and community care was strong in the early 1990s until –for budgetary reasons – it stalled in 1997. Spending on in-home and community based care grew at a 31 percent average annual rate between 1990 and 1997, and then slowed to a 15 percent annual rate of growth after 1997.

In-home and community based care appears to hold great promise as a way of holding down long term care costs and is universally preferred by seniors. Strong family support is required to supplement in-home care since in-home care is not available on an around-the-clock basis.

You should consider long term care insurance if you do not have a strong family structure or for whatever reason your family is not able to provide for your care.

THE NURSING HOME INDUSTRY

Nursing homes aren’t immune from government cutbacks and the increasing focus on in-home care. Nursing homes have felt the pinch as seniors have elected to receive in-home care, and the gap between private pay and Medicaid reimbursement has grown. The number of nursing home residents (down 5.7%), beds (down 4.6%), and occupancy rates have all declined across the country the last five years. The average occupancy rate in Michigan nursing homes is 84.4%, ranking us 28th in the country. During this same period, in-home and community based care has increased significantly. Thus, it’s not surprising that hospital discharge planners and nursing home operators try to cherry pick private pay and Medicare residents (while wait-listing Medicaid applicants); their survival may very well depend on it.

BE PROACTIVE

The growing senior population coupled with historic government budget deficits has put a strain on the long term care delivery system with no relief in sight. Although a shift to in-home and community based care, and the other cost cutting measures contemplated by the states may relieve some pressure, the system faces significant challenges in the future. Ironically, when a similar analysis of the Social Security system is presented to the public, we have universally concluded that it is foolish to rely on the Social Security system as our primary source of retirement income. Yet, when it comes to planning for care in our twilight years, we naively cling to the belief that the government will take care of us.

We recommend the following course of action to ensure that you get good care:

1. Educate yourself. Understanding the system will allow you to obtain the best care and take full advantage of the government programs designed for your benefit;
2. Prepare advance directives such as those discussed in Chapter One to allow your family or friends to advocate on your behalf in the event that you are unable to make your own decisions;
3. Plan ahead. Many programs, such as subsidized senior housing and MI Choice, have waiting lists. Advance planning will enhance your chances of aging in place. It is much more likely that you can stay in your own home if you use the care management provided by AAA or a private geriatric care manager;
4. Make yourself Medicaid eligible– using the techniques described in Chapter Six - to preserve as much of your assets as possible for your supplemental care (care not provided by Medicaid like specialized medical and dental care) and to leave a legacy to your heirs; and
5. Investigate long term care insurance. Insuring against the risk of needing long term care, and having dollars earmarked for your care, will increase the likelihood that you will be able to stay in your home or gain entry into a quality nursing home as you so determine.