Doing Long Term Care RIght: Part Four

The Capacity Issue

The third practical question we raised is: Can the alternative care venues encouraged by the global waiver, such as adult day care, home care and assisted living, satisfy the extra demand for their services at rates Medicaid can afford to pay?

Speaking to the purveyors of home and community-based services in Rhode Island left us with an ambiguous answer to that question–“maybe”–with many qualifications.

Adult day care providers told us their service is disadvantaged under Medicaid because they receive a single flat fee of $52.98 per day although it costs $100 per day to serve some of their participants. They have no incentive to serve higher acuity Medicaid recipients.

Home care providers told us they’ll need to see just how high-acuity the new patients diverted from nursing homes will be before they commit to providing services, even at the slightly increased, but still very low rates Medicaid is willing to pay.

Assisted living facility providers told us only a couple facilities have been willing to participate because, with an average private pay rate of $4,500 per month, none of the three rates variously available through Medicaid waivers in the past ($1,079, $1,700, or $2,011) covers costs. “We see no incentive for assisted living to take a Medicaid client. The program does not even cover 50 percent of our costs.”

State Medicaid staff have approached the challenge of rebalancing LTC ingeniously. Medicaid has increased reimbursement to adult day care and home care providers. Assisted living providers are next in line for enhanced reimbursement.

Yet, to date, only approximately 80 people have been relocated from nursing homes to home and community-based placements since the program’s inception in July 2009. Perhaps 150 in total have been diverted away from likely nursing home care into home care placements.

One sure way to increase and improve the supply of and access to all kinds of home and community-based services (HCBS) is to increase the level of private financing going to fund such services.

Unfortunately, for reasons already explained, increased public financing for HCBS through the global Medicaid waiver tends to have the opposite effect, replacing market-rate private financing with disproportionately low Medicaid rates.

The solution is to attract more private financing to HCBS by ensuring that public financing of all levels of long-term care is targeted to people most in need and that people more able to pay privately are required to do so–either up front at the time they need care or later through recovery of Medicaid costs from liens or estate recoveries.

The Crowd-Out Effect

The fourth practical question we raised earlier is this: Will Medicaid’s funding more of the services people prefer (home care) and less of the services they’d rather avoid (nursing home care) further discourage private LTC planning and financing leaving more and more of the cost of long-term care on public programs?

By now, the answer to that question is obvious and clear. Most Americans, including Rhode Islanders, don’t worry about long-term care risk or cost until they face a crisis.

Once Dad has a stroke or Mom succumbs to Alzheimer’s Disease, it’s too late to save, invest or insure for long-term care.

Then the path of least resistance is to rely on Medicaid to finance the care. And if Medicaid will pay for home and community-based care, all the better.

In the absence of strong controls on financial eligibility to limit access to Medicaid LTC benefits in the first place, most people find easy ways to qualify as explained above.

Without the certainty that Medicaid expenditures will be recouped after death from recipients’ estates, the program operates in effect, if unintentionally, as free inheritance insurance for baby boomer heirs.

In fact, Rhode Island does not effectively recover from estates now leaving at least $13 million uncollected annually and probably more.

Thus, so long as most Rhode Islanders can ignore the risk and cost of LTC, avoid the premiums for private insurance, shelter their wealth including home equity, and rely on public financing if they ever need expensive LTC, it’s easy to understand why so few of them save, invest or insure so they can pay privately for LTC when they need it and why so many of them end up dependent on the public welfare safety net.

The Big Question

That leaves us with the final question to answer:

What can policy makers do to ensure that care receivers, care funders, and care givers prosper and that quality long-term care at the most appropriate level is available to all even as the massive baby-boomer Age Wave finally crests and crashes on the state and the country?

END OF PART FOUR. STAY TUNED…

IN PART FIVE MONDAY:

  • Findings
  • Recommendations
  • References
  • Respondents and Interviewees
  • Appendix: Recognition of Donors
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