The Advisor's View of Long-Term Care Planning

How would proposed Medicaid block grants affect LTC Planning?

Posted by Tom Riekse Jr | Apr 12, 2019 8:48:13 AM

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Updated 4/12/19.  LTCI Partners Note:  Back in 2017 when the Republicans controlled congress they brought up the concept of block granting Medicaid.  Now, in 2019, the Democrats control congress and any congressional proposal to block-grant Medicaid would not pass.  However, the administration could attempt an end-run and simply implement block grants in states that are interested through CMS.  If that happens, what are the implications of block granting in states 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 Medicaid population with maximum flexibility. In fact, the 2017 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 under-fund 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. In 2017, representative Markway Mullin of Oklahoma (a 39 year old Gen-X) 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.

 

 

Topics: medicaid

Written by Tom Riekse Jr

Tom Riekse, Jr., ChFC, CEBS is the Managing Director of LTCI Partners. He has been working in the long-term care insurance business since 1991 with an emphasis on communicating the value of LTC planning to advisors, employers and consumers. He has primary responsibility for all marketing and technology initiatives at LTCI Partners, and has worked closely with carriers and vendors to make LTC Insurance easier to sell and enroll. Tom received his undergraduate degree in from Hope College, Holland Michigan. He subsequently achieved his MBA at the University of Illinois at Chicago, with a concentration in finance and marketing. He holds the Certified Employee Benefit Specialist designation from the International Foundation of Employee Benefit Plans and the Wharton School and his Chartered Financial Consultant from the American College.

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