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"Millionaires" on Medi-Cal: How a Myth Impacts the Poor
On May 2, 2004, a Los Angeles Times reporter wrote an article about Medi-Cal "loopholes" that allow rich applicants to qualify for long term care Medi-Cal. Citing unsubstantiated statistics from the for-profit and non-profit nursing home industries and the long term care insurance industry, the article implies that wealthy seniors are impoverishing themselves in great numbers in order to become eligible for Medi-Cal when they enter a nursing home.
In typical Legislative fashion, the Assembly Budget Committee reacted to the article - not by inquiring as to the merits of the article, but by calling for legislation in reaction to the article. On May 10, 2004, the DHS legal staff submitted language to the Assembly Budget Committee that would, in their words "close the loopholes." Unfortunately, AB 2102, the Medi-Cal budget bill drafted by DHS, would do far more than that. The bill would restrict nearly all transfers, regardless of whether the asset is exempt, including the family home, and allow the Department to implement the new law without any regulations or public input. By incorporating confusing and contradictory language, AB 2102 would undoubtedly cause the greatest harm to the poorest applicants.
A coalition of legal services groups was able to educate the legislators enough that AB 2102 is no longer on the table. However, the issues are still alive and well at DHS and in the Legislative Budget discussions. It is important that we educate our legislators about the other side of Medi-Cal.
While there are undoubtedly some who abuse the system, the specter of hundreds of "millionaires on Medi-Cal" is a distorted picture of the average long-term care Medi-Cal recipient that is akin to the myths of "welfare Cadillacs" and "welfare queens" of the 70s.
Medi-Cal Long Term Care Residents
The overwhelming majority of the 64% of California nursing home residents who have all or part of their costs of care paid for by the Medi-Cal program are not and never have been millionaires. They are former teachers, construction workers, housewives and gardeners, who have raised their children, saved their money and purchased homes, only to end up with the wrong disease. If they needed a heart transplant, they could enter acute care and Medicare would pick up the tab. Instead, they end up with Alzheimer’s and in a nursing home, where the cost of even a substandard facility can exceed $5,000 per month.
Most of these residents have spent their assets down to $2,000 - the limit for a Medi-Cal applicant. Many have spent hundreds of thousands of dollars on private pay before they applied for Medi-Cal. Many have husbands, wives or children who cared for them at home to keep them from a nursing home, only to see their own health deteriorate and with no alternatives to institutionalization. When they die, their survivors are faced with an estate claim on the family home which, if not paid, results in a lien with 9% annual interest.
No reputable elder law attorneys advocate the strategies noted in the article by such groups as Senior Care Advocates and attorneys who brag, "even millionaires can get Medi-Cal." Nor do they advise millionaires to get on Medi-Cal. While there is, indeed, a cottage industry that markets these planning strategies, they primarily market fear. Fear of ending up in a nursing home and losing the family home. As a result, many elders transfer assets needlessly and many never even enter a nursing home or apply for Medi-Cal.
In fact, while the reimbursement to long-term care facilities has increased significantly over the past ten years, the number of long-term care residents funded by Medi-Cal has actually decreased. Thus, if there are thousands of "rich" people spending down to get on Medi-Cal, this is certainly not reflected in the Medi-Cal rolls.
None of the healthcare "advocates" mentioned in the article is, in fact, an advocate for consumers at all. The nursing home industry is hoping that more stringent rules will result in more private pay. Stephen Moses’ Center for Long Term Care is funded primarily by the long-term care insurance industry, which hopes that more stringent rules and fear of losing the family home will result in more purchases of long term care insurance.
Not once in the past ten years did CAHSA or CAHF lend any support to efforts to curb the abuses by living trust mills and questionable annuity sales agents. It is only now, at a time of incredible budget challenges that are likely to affect the lowest income aged and disabled, that the nursing home industry tries to divert attention and to lay the burden of high health care costs on Medi-Cal recipients.
Many of CAHSA’s members, the not for profit nursing home industry, are notorious for either not accepting Medi-Cal certification in the first place or not accepting Medi-Cal eligible consumers. According to the most recent OSHPD data, Pilgrim Haven Retirement Community in Los Altos, noted in the article to be "shocked" by a resident who qualified for Medi-Cal, had only 15.8% of their patient days paid for by Medi-Cal in 2002, compared to a statewide average of 62%. The Pilgrim Haven administrator did not mention whether or not a spouse was involved, which might explain the exemption of a home, business property and some additional assets.
It’s the Law, Stupid!
DHS officials continually refer to the "loopholes" that allow transfer of assets, such as the home. One official noted: "There are some loopholes in the federal law that we can’t touch." What he really means, of course, is that there are federal laws that supercede California law.
Transferring the home to a spouse, a disabled child or a caregiver child is not a loophole?it’s the law. It was put in there by Congress for the good reason that certain categories of people should be protected and that caregivers should be encouraged, not penalized, for providing care that keeps the beneficiary at home and saves the taxpayers’ money.
The rich will always have "loopholes." The only thing the poor and middle class have going for them is the law.
For the past eleven years, the Department of Health Services has failed to promulgate regulations that would implement the federal OBRA ’93 Medicaid transfer provisions. Had they done so on a timely basis, the abuses and "loopholes" currently identified by the Department would not exist. To now allow the Department carte blanche to create rules to address a problem they have allowed to fester would be irresponsible and inequitable to the citizens of California.
While we strongly support changes in the law that will deter trust mills, annuity scams, and other abusive practices, we do not support changes in the law that would make it more difficult for elders and disabled consumers who cannot afford private pay or who have the wrong disease to make minimal transfers or to retain their family homes.
What You Can Do
You can contact your Assemblymember and Senator and let him/her know about the other side of Medi-Cal. You can let them know that passing onerous laws that force people to lose their family homes will create more problems, not less. You can let them know of the many nursing home residents who have depleted their assets to the tune of $5,000+ per month, only to end up abused or neglected in a substandard facility and with an estate claim on the family home.
If they don’t hear from you, the only voices they will hear will be those of the real millionaires - the nursing home and insurance industries.