Health insurance in the United States has a structural history of indemnity insurance. The philosophical underpinning is that health insurance should be sufficient to pay for the activities and procedures that get a worker back on his feet and back to work after an accident or unexpected illness. It aims to intervene in short bursts without long sustaining interventions. The goal is to get someone back to health after a temporary downturn.
This plays out in benefit design. For instance, Medicare (which follows the indemnity model) covers the first sixty days of hospitalization at a high benefit level, the next thirty at a medium level and then the regular benefit runs out. There is a lifetime reserve of 60 days where Medicare effectively pays 50% of the base rate, and after those are exhausted, Medicare covers nothing. My personal insurance covers 25 physical therapy sessions a year.
These are limited, acute situations that are being covered. They are not long term nor chronic conditions where improvement is a low probability event.
Medicaid is not like Medicare or most private health insurance in this country. Medicaid is schizophrenic in its benefit design. For relatively healthy and young people who have Medicaid, it is functionally similar to Medicare or any other insurance plan. People go to the doctor’s office, get a prescription, and perhaps pay a small co-pay and then go home. There is nothing unusual in Medicaid being a dessert topping here.
However, Medicaid serves a second function that no other health insurance program serves. It is the payer of last resort for long term care in this country. Medicaid eligibility for nursing home care is fairly restrictive — people who qualify can not have a significant number of assets in their name. Medicaid is also a floor wax.
The federal floor is $2,000 in personal assets, although states may allow higher limits, and the signing over of most personal income. For instance a 67 year old on Social Security and needing Medicaid for nursing home care can expect to sign over 90% of their check to cover a portion of their nursing home expenses.
This dual nature of Medicaid instead creates a few odd rules. The first is the look-back rule. Since nursing home care is extremely expensive, Medicaid does not want to pay unless there is a clear need. If an individual with significant assets begins to transfer the ownership of those assets to family members right before Medicaid payments begin, Medicaid will go after those assets as a transfer meant to hide assets. Estate recovery is similar in that Medicaid can go after an estate for assets that it did not know about to cover the costs of nursing home care.
Medicaid’s ability to do so is restricted to individuals over the age of 55 and to those who get long term care. The goal is to provide an incentive for people to pay for their own long term care via either self-funding or the purchase of private long term care insurance.
I don’t think the MA expansion changes these rules. Individuals over the age of 55 who get regular medical coverage won’t have to see their assets or income attached. Individuals who receive nursing home care will see Medicaid administrators going after assets and income streams if those exist.
? Martin
It doesn’t as far as I’ve seen. Medicare + Medicaid + SS are collectively designed to hold retirees at the poverty line and not a penny above. You won’t be destitute, but you won’t be vacationing either.
BruceJ
And the R’s whinge and moan about ‘death taxes’.
People who go on medicaid to cover nursing home care probably never could afford self-funding or private long-term care insurance. The option is stripping them of everything they own or dying in the street.
Yatsuno
@BruceJ: Every private long-term care insurance I’ve heard about has been total crap. They seem to go out of their way to either deny the benefit or only pay what is the very bare minimum in exchange for soaking the mark for hundreds of dollars a month for decades. It’s part of the reason why it got dumped by Obama as a solution to caring for the elderly.
pseudonymous in nc
This is perhaps where the (newish) Dutch model makes a bit more sense, by dividing medical expenditures into ‘cure’ and ‘care’. The ‘care’ side (long-term care, disability care, etc.) is funded by a payroll tax, while the ‘cure’ side is funded through heavily-regulated private insurance.
I'mNotSureWhoIWantToBeYet
@BruceJ: Dunno.
My wife’s parents were able to sell the home they lived in for 30 years for a very good profit. She was able to get LTC insurance before they moved in with us. They lived with us for several years and the LTC insurance paid a good part of their expenses for the final 3 years. He died (in the hospital) while living with us, she was in a nursing home her final year or so (her Parkinson’s and Alzheimer’s got to be too bad for us and a single aid to handle). There she converted from private-pay to Medicaid after she’d been there a year or so. (They wouldn’t have taken her as a Medicaid patient from day 1, IIRC.)
LTC insurance covers at most 3 years (at least her policy did) of payments. It’s not a panacea.
There are many middle-class people who simply will outlive their assets. (He was 88, she was 90.) Ending up with less than $2k in assets even after LTC insurance isn’t at all difficult if you’re spending $200 a day or more for care. Without Medicaid, almost nobody in the US but the extremely wealthy would be able to afford to live into their 80s.
FWIW.
Cheers,
Scott.
Crusty Dem
Slightly off-topic, my former boss^4 on his health care blog (not linking, google “Paul Levy” if you’re interested), he’s linking to Douthat and showing the increase in his own premiums as evidence of problems w/ACA. I thought Richard would be well-qualified to explain the premium increase (i think it has to do w/out-of-pocket max):
http://bit.ly/16eROA0
Ruckus
@Yatsuno:
The longer you deny coverage to someone old and in need of long term care, the sooner they probably will die, and then the ins co will need to pay nothing.
That is the business model for long term care insurance. So not a lot different that regular health care insurance. I’m beginning to see that a well run outfit like Kaiser HMO may be a lot better than HC insurance. They have at least some incentive to help the patient get better, they get to keep an income stream. And that income stream is better if the patient recovers faster and better. If they price right they make money and the customer gets better. HC ins moves money, their income stream doesn’t depend on the customer getting better, it is hurt by paying out too much to make that happen.
JaneE
This has been basically the same for at least 50 years. The rich pay an estate tax of what, 35 or 40 percent? For the poor it can be 100%. My Grandmother was on county medical aid. When she died, her house and everything she owned belonged to the county, in exchange for providing her medical care. All her family got was a very few personal items that “weren’t worth the cost of auctioning them off”.
Ruckus
I wonder how many of us there are out there that don’t have families any more or ever and who will live into their 80’s and 90’s without much of anything. We don’t have much of anything to lose, it’s already gone or we never had it. We don’t own a home we could live in or sell, we can’t afford LTC ins even if we wanted to and have no one to provide any family assistance.
Omnes Omnibus
@JaneE:
The rich don’t pay estate tax. They arrange things to avoid it. A trust and estates lawyer once put it to me this way, “the estate tax is completely voluntary.”
Mudge
@Omnes Omnibus: Interesting. The IRS can’t come after the wealthy when they evade the estate tax, but Medicaid can recover assets when some middle class loser (like me) tries to offload a few assets to the kids.
Omnes Omnibus
@Mudge: Well, one of the things is the timing of distributions. Off the top of my head, if you put something in a trust, it needs to be there for five years before it is safe from getting nabbed by medicaid. The thing is, if you are really rich, you aren’t setting up your trust when you are in your sixties or later; you may have had it from birth or you set it up as soon as you had enough money that the estate tax kicked in.
Ed in NJ
@Yatsuno:
In other words, everything you’ve heard is wrong.
There are very good long term care plans out there. Some accumulate cash value, while others are straight indemnity plans that allow you to choose your care and bank the benefit for future needs. And some plans are very rich at very low cost if you buy at a young enough age. The problem is that most wait until they are older and sicker before they consider the possibility they may need this type of insurance.
? Martin
@Omnes Omnibus:
Exactly. You build up a $100M IRA like Romney did. You distribute those assets among your family from day one. The same techniques work for minimizing Medicaid outlay. Work just as well for maximizing federal financial aid with the FAFSA.
Mary G
My mom paid a couple of hundred a month for years for long term care insurance. It only covered care in a nursing home, so she never used it. It was well worth the peace of mind it brought her, as she was able to leave me her house.
A few years ago the state of California sent me a postcard saying that they had partnered with some insurance companies to bring residents long term care insurance. I was skeptical, but sent it in anyway. The insurance agent and I had a good laugh about how completely ineligible I was to buy it. You have to get it when you’re fairly healthy, or you are out of luck.
Omnes Omnibus
@? Martin: My hometown is about as far north in Wisconsin as many lumber barons wanted to live back in the 19th century. A lot of money was made. Several of those family still have family trusts in the $100s of millions. The money never belongs to an individual. Houses are bought by the trust and one just lives there. The individuals often have small personal estates.
Yatsuno
@Omnes Omnibus: Duck and cover of the estate tax is a full time job for the accountants of the 1%. This is why you’ll never see an increase on it because there really is no point if you’re trying to get the superrich to pay any share upon death.
Omnes Omnibus
@Yatsuno:
Lawyers too.
Ohio Mom
Is this right? As I understand it, if you’re of Medicaid age and you go broke spending your money on the proverbial wine, women and song and then need to go into a nursing home for one reason or another, there’s no problem, BUT if you give money to family members during the look-back period for say, college tuition, or to start a business which ends up failing, or to put a down payment on a house — what I’m getting at, you’re not going to get repaid — that screws up your eligibility?
I hope I’m wrong because that seems very unfair.
? Martin
@Ohio Mom:
Unfair or not, that is how it works.
Omnes Omnibus
@Ohio Mom: Yeah, the grasshopper benefits, but so does the guy who slogged away for years trying to keep body and soul together. And it’s that second guy the rule is designed to benefit. Also there are exemptions from, and exceptions to, the lookback rule. I have never practiced in the elder care or medicaid areas, so I don’t really know much more than that.
Ohio Mom
Thanks for those quick replies. It does stink that extended families who would be helped by being able to pass a little amassed capital down to the next generation, can’t. But that’s what JaneE @ 8 was saying.
Omnes Omnibus
@Ohio Mom: They can pass it on. They just need to get the timing right.
raven
@Mary G: We are buying long term care but it covers both. We don’t have kids so we figured we better do something.
Mino
It depends upon the state, of course. In quite a few, any medical costs paid through Medicaid for a person over 55 is recoverable from their estate, with certain exclusions. Not just long term nursing home costs. So you had best check your application to see what rules apply in your state. In Arizona, they use a capitated plan that makes one liable whether any medical services are used or not. At least that is my understanding.
Obamacare did not change the ruling in the couple of states I looked up that had expanded the recovery program already.
The Other Bob
Richard- it is great to read well-informed articles about health care. Refreshing even. Thank you.
About that ACA website. Attacking ACA as a whole over the website is like saying we should disband the military because the F-35 has been problematic and full of cost overruns.
J R in WV
So the spouse was in the hospital a couple of years ago with septic shock for 59 days. She was already on SS Disability. Does that mean she has no hospital benefit left at all? One day?
This is news to us! Anybody know the actual rule as enforced on this kind of case? Her disability always throws counselors into a lack of ability to help.
Suzanne
@Mino: Do you have a link to share regarding this? I’d really like to learn more. THX.
Mino
@Suzanne: His last posting was where this was discussed…https://balloon-juice.com/2013/10/24/young-adults-and-their-parents/
Toward the end of the comments.
State policy appears to be stated on their application for expanded Medicaid. Like I said, it varies. Here is the file for Arizona…http://www.azahcccs.gov/community/Downloads/Publications/DE-810_english.pdf
Some good links if you google arizona medicaid estate recovery
chelsea530
Have been lurking for a while. I so appreciate the informative comments and stories about health insurance. Obamacare will benefit so many people, which is very good, but it’s oh-so-awesome that it’s gotten so many of us to read about others’ stories and get us all talking about this and better options.
We need to do more, but this is a good start.
I'mNotSureWhoIWantToBeYet
@Suzanne: In addition to Mino’s links above, NOLO has lots of good information about legal issues in general, and Medicaid issues in particular.
In our case, we talked to an eldercare attorney in our state a couple of times to make sure my wife’s parents’ wills were up to snuff (the best language in wills can be different in different states), durable power of attorney issues, medical directives, etc., etc. It only took a couple of visits to make sure everything was Ok.
HTH a little. Good luck.
Cheers,
Scott.
aimai
@Ohio Mom: A lot of this is predicated on the notion that your children will be past the age at which you are legally obligated to care for them (so, past 18) and that if they could do it they should be caring for you. The state is stepping in because of the breakdown of the family and the inability of the younger generation to care for their own parents. Just like when the state has to step in to pay for a deadbeat dad through welfare payments to the children he has abandoned and it might want to try to garnish his wages to recoup the costs.
I’m really sympathetic to people who face this problem and it arises because as a society we have averted our eyes from the problems people face maintaining their independence into extreme old age. But I’m not sure why people should expect to take a taxpayer subsidy for nursing home care and also pass their assets on to their children. The system is horrific but its not unfair, is what I’m basically arguing–the government isn’t in a position to determine what you spent your money on that led you to present yourself to them as indigent. And would it really be more fair for someone to be wealthy and give all her money to her children for them to spend on stuff and then take a government subsidy away from a poor woman for nursing home care? Its a limited pot of money. It shouldn’t be, but it is. If there were no penalty for accessing it then everyone would avail themselves of it whether they “need” it or not.
Mino
@aimai: States are very hungry for funds and where perhaps in the past, they would have let it slide, they may choose to recover medical costs unrelated to nursing home charges.
For the entire population on Medicaid aged 0 to 55, medical costs are NOT recoverable. After age 55, it depends on your state. And is not necessarily confined to nursing home charges.
kathy a.
@J R in WV: No, my understanding is that the Medicare benefits clock starts again with a new hospitalization. (I’m assuming she’s on medicare because of the SS-eligible disability?) That was our experience with my elderlfy grandmother, mother, and now with my disabled SIL.
piratedan
@Ed in NJ: maybe there are Ed, but as some folks know, I got to be the person who essentially served as a live-in caregiver for my mother and her second husband as their health circled the drain. Both had long term care policies, one with State Farm the other with MetLife. My mother had lung cancer coupled with emphysema, no energy to shop, clean, or cook. He had advanced Parkinsons, which severely affected his short term memory and gave him other side effects like severe tremens and rapid weight loss. Despite documentation from their local physician, both had their long term claims denied for reasons as follows… they didn’t need assistance dressing and we’re capable of feeding themselves, i.e. able to lift a fork from a plate to their mouths. As far as the insurance companies were concerned, they were self sufficient, right up until the time that they were admitted to hospice care.
After an ongoing battle during the remainder of their lives and for five months afterwards, I corresponded, phoned and lodged complaints and appeals through the state agency and the company’s own appeals process for claims until after their deaths, they conceded that they needed the care that they were getting from the Home health organization that I had contracted with to assist me in their daily caretaking.
I’m glad I was in a position to help, I’m glad that I had an organization to work with that was willing to work with me while we did the claim dance with the insurance companies, I would just advise anyone who gets one of these long term care policies to read the fine print and understand what they mean by “no longer being able to care for yourself” and what you think requires assistance and what they think it means.
Richard Mayhew
@J R in WV: 60 days in a benefit year are covered at the highest level, and then another 30 days at a medium benefit level. Your wife still has 31 days of regular benefits in reserve under this scenario plus 60 more lifetime days available (which are expensive for you)
She’ll get her full allotment back on Jan. 1, 2014 so she could then do another 90 days in the hospital in 2014 with regular benefits.