The Medicaid program is the largest publicly funded source of long-term care coverage in the nation. Over the last several years, an increasing percentage of those who enter long-term care (LTC) facilities, as well those who receive home care on a long-term basis, have had a substantial portion of their costs paid for by the Medicaid program. Individuals who might have paid for long-term care costs themselves or would have purchased private long-term care insurance have turned to various methods of estate planning and asset sheltering activities as a means of qualifying for Medicaid coverage of their long-term care expenses. Program costs are split by the federal and state governments, so that any increase in the long-term care population, in conjunction with this population’s move to shelter as sets, leads directly to increases in both federal and state Medicaid budgetary costs.
Married couples can usually protect certain assets from consideration as a means for paying for nursing home costs. These as sets would include a home, a vehicle, and monies put aside for a small amount of life insurance and for burial purposes. Medicaid statutes include protections against spousal impoverishment to ensure that when one spouse enters a nursing home, the other spouse the community spouse has sufficient in come and assets to prevent impoverishment, thereby negating any need for financial asistance from the federal or state government.
In this report, the CNA Corporation (CNAC) and our partner, the University of Minnesota (U of MN) present on one such financial instrument that has been used as a means of sheltering assets, thereby potentially increasing costs to the Medicaid program. These instruments are commonly referred to as Medicaid annuities and can potentially reduce the assets held by the institutionalized spouse by converting these assets into an income stream for the community spouse. The main effect is that assets that could have been used to pay for nursing home costs have essentially been transferred to the community spouse, which in turn, means that the Medicaid program has to step in to pay for the nursing home costs of the institutionalized spouse. Annuities may also be used by a single individual in order to maximize the individual’s bequest to his or her heirs.
Has this sheltering of assets occurred on a wide enough scale to lead to major impacts on the Medicaid program? We’ll report on some previous information that’s been gathered on this question, but it’s clear that gaps in the knowledge of Medicaid annuity use and program costs remain. This report has been designed to help fill that gap by answering two important questions related to the Medicaid program:
- How widespread is the use of Medicaid annuities in sheltering assets in order for individuals to qualify for the Medicaid program?
- How much money is the use of annuities costing the program?
We will answer these and other questions in the course of our analysis, undertaken at the request of the Center for Medicare and Medicaid Services (CMS). To do this, we have designed a study plan that includes interviews with key participants, as well as the analysis of data gathered directly from State Medicaid files. We have developed a model that uses the case file data to determine the potential effects of annuities. In the course of our analysis, project activities to understand and quantify the effects of Medicaid annuities have included:
- Designing and developing interviews to be used with state Medicaid directors, state policy staff, and county eligibility staff
- Designing focus group interview questions and protocols
- Reviewing the literature
- Gathering information from interviews of state and county personnel as well as consumer and industry representatives
- Sampling Medicaid case data on state reporting systems to determine costs
- Conducting the focus groups with potential Medicaid applicants/recipients to determine knowledge and attitudes toward the use of annuities
- Analyzing the information, and answering the research questions regarding the effects of these annuities
- Recommending changes in federal and state policies.
Later sections of this report will describe these activities in more detail.
Contents
Executive summary
- Introduction
Questions
Summary of results
Background and approach
- Statement of the problem
Analytical approach
Recruiting states for the study
Designing and conducting the interviews
Designing and conducting the focus groups
Collecting county Medicaid case files
Analyzing the data and measuring the impact of Medicaid annuities
- Determining eligibility
Resource eligibility
Income eligibility
Types of annuity products offered
Interviews with key informants
- The interview process and participants
Consumer representatives
Industry representatives
State Medicaid officials
County Medicaid eligibility workers
Marketing annuities
- Treatment of annuities in the Medicaid eligibility determination process
Perceptions of annuity use
State administrative issues
Policy recommendations
Spousal impoverishment
State policy changes
Interviewee policy recommendations
Focus group results
- Background and objective
Research methods
Subject Recruitment
Conducting the Focus Groups
- Summary of findings
Future need for and means of financing long-term care
Long-term care Insurance
Cost of Long-term care
Reliance on Medicaid for long-term care
Annuities
- Focus group summary
Medicaid case file data and analysis
- Medicaid case file data
Data issues
Estimating the county incidence rate
Annuity cost
- Modeling program cost effects
A simulation model for estimating annuities’ effects on Medicaid
Resource and income constraints
Nursing home stays and costs
- Estimates of the cost to Medicaid, by county and state
County cost estimates
Extrapolating to the state
Grouping states by their annuity policies
Extrapolating to all states
Conclusions and recommendations
Appendix A: State Medicaid Official Interview Guide
Appendix B: State Policies Related to Annuities
- Missouri
Nebraska
Arizona
Proposed Missouri statute
Current Bill Summary
APPENDIX C: Focus group discussion guide
- I. Introduction
A. Moderator
B. Focus Group
C. Facility
D. Notes from observers
E. Respondents
F. Topic For Focus Group
Long-term care
Annuities and Medicaid
Appendix D: Medicaid nursing home estimates
References
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PDF Ebook Analysis of the Use of Annuities to Shelter: Assets in State Medicaid Programs
