How would proposed Medicaid block grants affect LTC Planning?

Posted by Tom Riekse Jr on Feb 3, 2017 3:52:39 PM

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With President Trump and a Republican Congress, there is a great chance that Health Care changes will be enacted. And one very possible outcome would be the "block-granting" of Medicaid to states. It's a policy that both the new nominee of Health and Human Services Secretary Tom Price and Speaker of the House Paul Ryan support. What are the implications of block granting for those needing or planning for long-term care?

A little background. Medicaid is the largest payer of LTC costs, paying for about 60% of nursing homes expenses. Almost all states have also applied and received "waivers" from Medicaid allowing states to provide home and community based care. In 2014 Medicaid paid up to $150 BILLION in LTC costs.

Current Medicaid is funded through a 60's era formula of cost-sharing between the states and the federal government. The percentage of federal funding for basic Medicaid (not expanded) ranges from 50% in states like California and New York up to 75% in Mississippi. 

Now, over 50 years after the passage or original Medicaid, big changes may be looming. Block grants would simply hand over money to states and allow them to develop plans to take care of the poor with maximum flexibility. In fact, the nominee for Health and Human services, Tom Price, testified that states could determine who was eligible for coverage. Medicaid would transition from being a federal entitlement program to a state based program.

With this type of flexibility, states could take different approaches in what type of care they provide. The level of care may dramatically vary by state depending on the financial condition of the state as well. Some states, like Illinois, so underfund Nursing Homes that some are becoming a mix of seniors, ex-felons and drug addicts. The predictable result - lawsuits and fewer facilities. Other states are dealing with wait lists for home health care.

Add in a shortage of health care workers and declining immigrant population, and the crisis that many predicted for years could be said to be officially here.

The concept of Medicaid "planning" is becoming more and more an oxymoron- using things such as asset transfers or annuities in order to preserve personal assets while having the states pay for quality care is becoming more unrealistic. Just last week, representative Markway Mullin of Oklahoma (a 39 year old Gen-X) has introduced a bill titled the "Close Annuity Loopholes in Medicaid" Act. If we aren't already divided enough as a country, get ready for the generational fights related to boomers heathcare costs.

There will be a big fight on long-term care funding in the foreseeable future.  Medicaid for long-term care can be there one day and the next day possibly go "poof". Nothing is guaranteed - and even some LTC carriers are facing big struggles to meet their projected claim needs. A prudent LTC planning approach looks at different scenarios to do what is in the best interest of a client.