good morning welcome to everyone this is a hearing on examining abuses of medicaid eligibility rules pursuant to committee rules i will read the mission statement we exist to secure two fundamental principles first americans have a right to know the money washington takes from them is well spent second americans deserve an efficient and effective government that works for them our duty on the oversight and government reform committee is to protect these rights our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right to know what they get from the government in partnership with citizen watchdogs to deliver the facts to the american people and to bring genuine reform to the federal bureaucracy this is the mission of the oversight and government reform committee i will now recognize myself for an opening statement and then the gentleman from illinois ranking member mister davis as this committees mission statement just made clear americans have a right to know the money washington takes from them is well spent americans also have the right to know whether social programs that were designed for a specific purpose have been hijacked wittingly or unwittingly by those who have figured out how to game the system today we will examine alleged abuses of medicaid eligibility rules as we do we are guided by the principle that each dollar taken from a private citizen has a real cost and government needs a compelling rationale for taking that dollar to be clear this country has a rich history of providing a social safety net for the elderly and the ind nt some seek to turn the safety net into a hammock or trampoline not only is this fiscally irresponsible it erodes the very little public trust people have left in the institutions of government without question the medicaid program  is on an unsustainable course over the past two decades national medicaid spending has increased from less than seventy five dollars billion per year to over four hundred dollars billion per year at the state level medicaid growth has put tremendous pressure on budgets and is crowding out other state priorities such as education and public safety at the federal level medicaid growth has the same effect plus it is contributing to our national debt and as more than forty cents of each dollar is borrowed medicaid  a means tested welfare program designed to provide medical care to the poor and disabled todays testimony will reveal that medicaid is not being used solely by the indigent although medicaid technically has income and asset tests these tests are easy to circumvent and abuse in fact an entire cottage industry has arisen seeking to educate the wealthy on how to transfer or hide assets so taxpayers can pay for their long term care in one thousand nine hundred and eighty two congress made it clear all of the resources available to an institutionalized individual including equity in a home which are not needed for the support of a spouse or dependent children will be used to defray the costs of supporting the individual and the institutions despite this congressional intent all the resources available to the institutionalized individual are not being used to defray the taxpayers cost of supporting these individuals according to the cms less than one percent of the money spent on nursing home care is recovered the art of artificially impoverishing oneself to get medicaid coverage has spawned a standalone industry medicaid planning is pervasive a google search which includes quotes around medicaid planning yield over a half million hits popular books are available like the one entitled how to protect your familys assets from devastating nursing home costs medicaid secrets this book includes tips on how to title your homes so you dont lose it to the state how to make transfers to family members that dont disqualify you from medicaid how annuities make assets disappear smart tricks for spending down your assets what to change in your will to save thousands of dollars if your spouse ever needs nursing home care to avoid the states reimbursement claim following the nursing home residents death government programs should not have secrets and artificially impoverishing oneself to become eligible for a program that was not designed for you is wrong in two thousand and six the europost ran an article about medicaid millionaires in one county in the state in that year nine millionaires had taxpayers paying for their medicaid bills one man worth nearly two dollars million had medicaid pick up over eighty thousand dollars in nursing home costs for his wife one woman worth one dollar sixty cents million had medicaid pick up over two hundred thousand dollars in nursing home costs for her husband since half of new yorks medicaid bill is financed by federal tax payers taxpayers in my home state of south carolina are paying for millionaires on medicaid in new york about once a decade congress revisits the eligibility rules for medicaid to crack down on abuse in one thousand nine hundred and ninety three  reconciliation act congress required states to do a state recovery in the two thousand and five deficit reduction act congress closed some loopholes and extended medicaids look back period todays testimony will reveal whether previous congressional action in this area has worked we all know that tough choices are coming and that there will be strong partisan differences about the way forward todays hearing offers us an opportunity to explore an area where there should be genuine bipartisan agreement medicaid was intended for the poor and the disabled millionaires should not be on welfare if the rules of medicaid allow individuals with sizable portfolios to qualify for the program and protect the inheritance of their children since its inception in one thousand nine hundred and sixty five i have always said that medicaid and medicare were the best things that happened to health care especially for elderly and low income people in this country since the indians discovered corn flakes i am a firm believer that those individuals who have no other resource who have no other way to be care should in fact be cared for by the resources that we make available to them the medicaid program funds one of  spending in the united states additionally medicaid spending has increased to over four hundred dollars billion last year this number gives us pause those of us who continue to view medicaid solely as a budget challenge are missing the mark this program involves real people and is about real people and their ne policy solutions that focus only on limiting public obligations or long term care financing do the citizens of our country a great injustice realistically individuals and families bear the majority of care giving and financial consequences families and friends provide upwards of eighty percent of long term care in the united states i am open to new ideas to facilitate the care of people across all age groups who are needy and certainly not for those who are simply greedy these discussions cannot be filled with flawed assumptions about peoples resources the vast majority of medica enrollees have limited resources including the thirty three million children the eleven million persons with disabilities the seventeen million non disabled adults and the six million seniors in illinois more than two point seven million illinois seniors children and individuals with disabilities rely on medicaid services and programs long term care a valued program it includes medical as well as non medical care to those who have a chronic illness or disability long term care helps meet our personal needs most long term care assists people with support services such as activities of daily living like dressing bathing and using the bathroom long term care can be provided at home in the community in assisted living or in nursing homes the dignity and peace of mind given to people who utilize these services is immeasurable certainly there are those who attempt to misuse the system but the vast majority of enrollees are simply those who otherwise would not have the wealth or income for such personal daily care these bad actors must not cause us to throw up our hands and surrender i have a term that i often use that says i dont ever want to throw out the baby with the bath water  i want to throw out all of the waste abuse and misuse of the program that we possibly can medicaid must continue to provide coverage based on federal standards that ensure maximum access for low income and special needs populations with fund allocations based on the needs of these populations a meaner medicaid is not a sufficient solution now is not the time to reduce access compassion and common sense must prevail affordable accessible quality health care should not be a partisan or political issue but a human  individuals who are misusing the system those individuals who are using it as a way to make sure they can transfer wealth all of those efforts that are underway to provide subterfuge to provide ways to deny access to individuals who really need the services i will work with you and other members of th body to remove to carve out and get rid of all those individuals and those opportunities again i thank you for the hearing and look forward to the testimony a significant problem in my state of arizona the crippling recession of late has affected my state tragically reducing the money in the general fund by two dollars billion in only a couple short years the governor and legislature are finding of the biggest expenses the state has is the medicaid program in a time when this program meant for low income people in need of basic health care is facing deficits we need to explore critical reforms that will ensure limited medicaid dollars reach those who need it most today we will find that long term care eligibility standards in current federal law do not achieve this goal i also agree with you that this hearing should be bipartisan we have strong disagreements with the massive medicaid expansion contained in the presidents take over of health care but we should be able to find common ground the taxpayer program should not serve as inheritance protection and that the rules that can be navigated so millionaires can qualify for welfare are in desperate need of reform according to the law firm wright  in houston texas even if a clients assets are substantial the firm in almost every case be able to successfully achieve a satisfactory plan for the client to preserve assets an organization in california called nursing home  solutions states we get middle class families excellent nursing home care funded by medi cal this advertising makes medicaid planning sound like the proverbial free lunch while the individual family benefits from taxpayers supporting long term care services received by that individual there are also clear costs the obvious cost is to future generations and business owners who will have to pay this bill and who have the result of less capital to invest in the economy the less obvious cost is that nursing homes and long term care providers are harmed by more individuals receiving medicaids low reimbursement rate the policy question is who should bear the burden of paying the cost of long term care it would be convenient to say the other guy but what happens when the other guy is tapped out taxpayers are simply tapped out and our nation is running a one dollar sixty cents trillion deficit for the third straight year our friends on the other side of the aisle may say this cost should be socialized but that solution is misguided for two reasons the first is that we need to be figuring out ways to reform medicare and medicaid not to expand it the second is that it runs counter to the obvious principle that individuals spend their own money better than they spend other peoples money since the private sector does most things better than the government can the private sector play a role in figuring out a way out of this problem i respectfully assert that the free market solutions have never been able to take hold in the market for long term care because of medicaid since it is so easy to get taxpayers to foot a persons long term care needs individuals dont have any incentive to plan for these expenses dont take my word for it whoever in two thousand and eight jeff brown at the university of illinois and amy finklestein of mit wrote an article entitled the interaction of public and private insurance medicaid and a long term care insurance market this article appeared in the nations most prestigious peer reviewed economics journal american economic review the findings are that all but the wealthiest households in the country have virtually no reason to purchase long term care insurance this is because a private policy pays for many benefits that simply replace benefits medicaid would have paid for it is important to note that brown and finklestein did not even account for the art of medicaid planning assumed that people actually have to spend down their assets in order to qualify for medicaid therefore it is unfair to criticize the private long term care insurance industry for lack of policies a private insurer is not competing on a level playing field with medicaid since medicaid is so heavily subsidized the way i see it the choice is clear we can fail to reform these rules this would continue to allow relatively affluent individuals on welfare to discourage all of us from taking seriously the possibility of needing to take care of long term care in the future this failure will doom the whole system as a whole the alternative is to reform the rules and reduce the loopholes real reform should prevent affluent people from qualifying for welfare with  the effect of preserving the inheritance of their adult children real reform would also promote personal responsibility and awaken americans to the fact that while living longer is a great thing it comes with the possibility of requiring assistance real reform w preserve taxpayer dollars to assist genuinely needy individuals in getting care real reform would reduce medicaid burden on state budgets and the federal budget and would decrease the amount of money that washington borrows from abroad mister chairman thank you for calling this hearing  eagerly await the testimony of our witnesses to learn more about this issue and steps that can be taken to reform the program i yield back mister gowdy i thank the gentleman from arizona i would also like to recognize and thank the gentlemen from missouri and tennessee respectively for their  one first as a career u s government employee with the health care financing administration the predecessor of the current cms then for the inspector general of the u s department of health and human services and since one thousand nine hundred and eighty nine in the private sector i am currently president of the center for long term care reform in each of these roles i conducted national and state studies of medicaid and long term care financing my remarks today are fully developed and documented in published reports available on our website at centerltc com medicaid is supposed to be a long term care safety net for people in dire financial need instead it has become the dominant payer for most americans who require extended care at home or in a nursing including the middle class and even the affluent how can this be true if medicaid is a means tested public assistance program that is the key question before you today here is the answer although everyone says medicaid eligibility requires low income that is untrue for people over the age of sixty five who need long term care federal rules require most states to deduct medical expenses including the cost of nursing home care from applicants income before determining eligibility some states apply income caps but these are easily evaded by means of special income diversion trust bottom line income almost never disqualifies anyone for medicaid long term care eligibility what about assets it is true that cash and negotiable securities over two thousand dollars are disqualifying in most states but it doesnt matter how people spend down to that level as long as they dont give away their assets financial advisors frequently tell clients to purchase exempt assets take a world cruise throw a big party all disqualifying spend down methods just how many exempt assets can applicants retain and still qualify for medicaid long term care benefits there really is no meaningful limit exempt home equit capital and cash flow individual retirement accounts or iras one automobile prepaid burial plans not only for the medicaid recipient but for all immediate family members term life insurance which allows recipients to evade the medicaid estate recovery mandate and household goods and personal belongings all without any capped limits the federal regulations and policies that require these exemptions are documented in our report entitled medi cal long term care safety net or hammock medi cal is medicaid in california and these problems and issues apply nationwide married applicants for medicaid ltc benefits can retain substantially more income and assets than single people up to two thousand seven hundred and thirty nine dollars per month of income and half the joint assets of the couple up to one hundred and nine thousand five hundred dollars if the healthy spouses personal income an assets are below these levels the medicaid spouses income and assets are transferred to bring him or her up to the limit these spousal impoverishment protections increase annually with inflation because of these very generous basic eligibility rules the vast majority of americas elderly qualify easily for medicaid when they need long term care the conventional wisdom that people must spend down into impoverishment before medicaid will help is  y untrue only the most affluent need to consult medicaid planners and use special legal techniques such as trusts transfers annuities life estates life care contracts and promissory notes to qualify the other panelists will discuss medicaid planning the key point i want to make is that we need to remember that egregious medicaid planning is only the tip of the iceberg the bigger problem is that medicaids basic eligibility rules allow most people to qualify after they need long term care and without spending down their wealth first to conclude easy access to medicaid has the effect of desensitizing the public to long term care risk  costs medicaids home equity exemption prevents people from using reserve mortgages to finance home care with most of their assets protected by medicaid few people plan early to save invest or insure for long term care well intentioned public policy has turned into a perverse incentive discouraging responsible long term care planning furthermore consuming scare public welfare resources to indemnify affluent baby boomer heirs of well to do seniors hurts the poor instead of helping it is like friendly fire in the class war medicaid could save up to thirty dollars billion per year if people had to consume their home equity before qualifying for public benefits as is true in england the programs most expensive dual eligible recipients could be reduced by twenty percent reverse mortgages to fund long term care would thrive and generate new jobs and tax revenue the private long term care insurance market would expand creating even more jobs and revenue but most importantly relieving the financial pressure on medicaid in this way would enable the program to survive as a quality safety net for those who are truly in need my analysis explaining how medicaid can save thirty dollars billon per year by encouraging financing of long term care through private financing alternatives has been made available to the s i grew up with elder law around the house when her friends would come over to probate their husbands wills to transfer keys to the children to take care of those family matters that her senior friends had when i began my practice obra ninety three had just become the law and i attended bar association meetings met leaders in the medicaid legal field and began teaching other people how the system works because while medicaid is certainly not a secret program it is so difficult for people to understand how it works given the massive unfairnesses and confusion in qualifying for benefits my clients would come to me typically because they had a spouse who had parkinsons or alzheimers a parent who needed care and they didnt know what to do they werent sure what their options were what we set about doing was educate people as to how the system works and creating an individual tailored plan much like for health care what was the best thing for that particular individual to do  it might be trusts or annuities changing title to the home investing in pensions or insurance but i am going to suggest that the abuse is a m that is not really what is happening that is not what any of my clients wanted none of them wanted to game the system they all wanted to know what should i do the same way a woman whose husband has had a stroke says to the doctor what am i supposed to do they say to the social worker what am i supposed to do how am i supposed to live where will i be living what will happen to the pension the social security who is going to provide the care soup kitchens are free and nobody checks five years worth of bank statements and  there for lunch in terms of creating a health care system we dont need a punishment health care system periods of ineligibility or penalty periods we need a system that has a cost sharing approach that invites people in so they can access necessary care and share in the costs that is what people want not an all or nothing approach we cant mandate abject poverty because that is what people are terrified of if that has to be created no matter what the rules are people will do whatever they have to do to get the necessary health care for their loved ones or they will suffer and die without care i saw people who were increasingly afraid to get care as medicaid laws became more onerous people who qualified for benefits people who were poor and needed health care but didnt fill out the application because they didnt have the bank statements subcommittee thank you for the opportunity to speak to you today about this important topic my name is janice eulau and i have been employed by the suffolk county new york department of social services for the past thirty six years i currently serve as the assistant administrator for the medicaid program in that county approximately one hundred and eighty thousand individuals receive medicaid in suffolk county with five three hundred in receipt of nursing home care in two thousand and ten the nursing home care costs for those five thousand three hundred individuals was four hundred and twenty nine  cents million with a federal cost of two hundred and thirteen dollars seventy cents million as a long time employee of the local medicaid office i have had the opportunity to witness the diversion of applicants significant resources in order to obtain medicaid coverage it is not at all  unusual to encounter individuals and couples with resources exceeding five hundred thousand dollars some with over one dollar million there is no attempt to hide that this money to exists there is no need there are various legal means to prevent those funds from being used to pay for the applicants nursing home care wealthy applicants for medicaids nursing home coverage consider that benefit to be their right regardless of their ability to pay themselves there is limited understanding that medicaid nursing home care remains a means tested program not an children without compensation this transfer results in a penalty period where medicaid will not pay for nursing home care approximately one month for every ten thousand dollars transferred the other half of the excess resource is also transferred to the children but in return for a promis sory note which will produce an income stream to cover the cost of care during the penalty period our county regularly seems promissory notes in excess of one hundred and fifty thousand dollars with matching uncompensated transfers for couples the most common method of preserving resources is spousal refusal in this case the spouse in the nursing home transfers all resources beyond those he is allowed to keep to the well spouse living at home since transfers to a spouse do not incur a penalty period in new york the institutionalized spouse may retain thirteen thousand eight hundred dollars the spouse living at home can retain up to one hundred and nine thousand dollars in addition the home and prepaid burial expenses are exempt an in excess of these resources is deemed available to meet nursing home costs however federal law allows the spouse at home to refuse to support the applying spouse and requires states to then base medicaid eligibility determination on the income of only the applying spouse states then have the right to bring support proceedings against the refusing spouse my county has pursued the refusing spouse in the past however in family court we are only allowed to address the ex income and attach resources for past medicaid payments any future proceedings would need to be addressed in new york supreme court a process that would take months or years for each case and severely strain our limited local resources the remedy for these abuses lies in education as well as changes to law many seniors believe that medicare and their supplemental insurance policy will pay for the nursing home care when in fact these policies will only pay up to one hundred days of care and only under certain circumstances medicaid communication through their annual handbook and their official website is woefully lacking information in this area not surprisingly wealthy seniors fail to realize the value or need for long term care insurance having a better understanding of the limits of medicaid would enable seniors to make timely and informed decisions regarding their future care needs in addition incentives for the purchase and use of long term care insurance should be provided by the federal government i also respectfully suggest that the law allowing spousal refusal be adjusted to enforce the current resource limit and allow the spouse at home to petition court for higher resource levels should his or her circumstances call for such an increase instead of requiring the state to address each refusal allowing wealthy spouses to ignore their financial responsibility to one another is a policy we cannot afford in closing i would hope that the medicaid program can fulfill its original mission to provide quality health coverage to individuals who are unable to afford such care or the insurance to pay for this care however individuals with resources above and beyond the level prescribed by law should not be allowed to fund their childrens inheritance while the taxpayers fund their nursing home care i strongly believe this is not a partisan issue i also believe in the merits of the medicaid program but feel just as deeply that the issues regarding resource diversion need to be addressed thank services which among our other responsibilities manages one of the largest medicaid programs in the nation illinois serves two point seven million clients through medicaid and schip at an overall program cost of sixteen  today we are talking about eligibility policies for medicaid long term care and this for us in illinois is a most propitious time to be talking about this since we are tackling this exact issue as a new director of hfs last april i learned that illinois previous administration had not yet implemented the federal dra that passed in two thousand and six accordingly almost immediately when i came in we set to work to create rules involving medicaid eligibility for long term care rules that incorporate the dra but go beyond it to actually deal with the loopholes you are hearing about today since we have now learned from the experiences of other states some of those loopholes are in fact spelled out in the council for long term care report that i have read very closely i have to be honest and tell you that this is a struggle in illinois to convince our legislative rulemaking committees to adopt these rules this is not a democrat nor republican problem there seems to be much to my surprise a bipartisan acceptance of the so called medicaid estate planning practices that allow people to divest their assets in order to qualify  for medicaid nursing homes the paper i think articulates the problem which is that there is no stigma attached to this we agree with you that it is our responsibility to eliminate any abuse in the medicaid program and we are working hard right now to move along on some of these reforms today i would like to touch on two other issues that have the potential to drive down medicaid costs for long term care of our two point seven million clients fourteen percent are seniors and adults with disabilities yet this fourteen percent of medicaid clients incur fifty four percent of the costs many of these same clients are also expensive dually eligible medicare  clients while we are fully committed to providing and most of them really are low income and very vulnerable people and they need long term care but our focus is all about service delivery reform illinois historically has institutional bias building up state operated institutions and nursing home beds we currently have an excess of fifteen thousand empty nursing home beds so we have overbuilt on that side but we have failed to invest in  home and community based services obviously at a much better cost we believe we can achieve medicaid savings and promote a higher quality of life for seniors and disabled to afford to stay in their homes by rebalancing our long term care system to shift from nursing homes and make investments in home and community based services in addition many health care services are fragmented for both medicaid and medicare and result in unnecessary and wasteful hospitalizations with  revolving door of admissions and readmissions to acute care hospitals to psych wards of hospitals and to free standing psychiatric hospitals in order to drive down these costs medicaid must in conjunction with medicare for those who are dually eligible provide care coordination for these most complex and expensive clients who have chronic health and behavior health conditions with the goal of keeping them healthier stable in the community and not in hospitals but in community based long term care i just want to convey to you that in this period of the affordable care act planning we are spawning an era of innovation in the health care delivery system ultimately result in cost savings for both medicaid and medicare i urge you to maintain the federal funding for state medicaid programs and funding for these federal demonstrations waivers innovations and policy initiative five minutes of questions mister dorfman what is the purpose of medicaid universal health care or just for the indigent mister dorfman the program has financial qualifications mister gowdy i hadnt gotten to those yet i am just asking you a general question do you think the purpose of medicaid is to provi universal health care or only for the indigent mister dorfman health care for anyone who qualifies for the program mister gowdy do you agree with me that there is a difference between actual indigency and legal indigen millionaires who voluntarily impoverish themselves so their heirs can inherit money and taxpayers can provide for their medicare you dont consider that gaming the system mister dorfman no because that is not most of what happens or the way it happens there are those aberration are there millionaires who have voluntarily impoverished themselves so their children can have an inheritance and we can pay for their long term care mister dorfman that is not the typical experience across twenty years of doing medicaid planning with their adult children mister dorfman they frequently come with their adult children it is almost always with either a spouse or an adult child unless it is an isolate individual who doesnt have family mister gowdy you consider your client to be whom the individual or the children  client is always the individual but the individual is almost always concerned about what is going to happen to their spouse or family members mister gowdy speaking of spouses mister moses what is spousal refusal moses that is a practice recognized primarily in new york and florida whereby the well spouse as ms eulau explained simply refuses to contribute under normal medicaid requirements for the cost of the care of the medicaid recipient under the law the medicaid recipient has to have legally owed but this rarely happens because it is so complicated to do the elder law bar in frequent annual conferences urges the rest of the country to take advantage of what they consider our right under the federal law to simply have the spouse refuse to contribute to the cost of the care it is very very expensive in new york and florida frankly i dont think most of the other states have the moses there are problems in how medicaid eligibility is determined so that there are what some call loopholes but there are provisions in the law that make it quite easy and feasible for people with substantial wealth to qualify as i explained in my testimony the real problem is not just the tip of the iceberg which is the egregious medicaid planning millionaires onto welfare as m dorfman was saying the real problem is that the median elderly person in terms of income and assets walks right onto medicaid because of all of the exempt assets without limit bracket creep to the point where virtually anyone if they dont plan ahead to prepare to pay their own long term care can get medicaid relatively easily no matter how much money they have mister gowdy my time has expired medicaid eligibility by inappropriately shielding their wealth in the studies i have looked at by gao as well as kaiser and some others it would suggest to me that the numbers of individuals who are able to shield large wealth portfolios is relatively small may i ask if your experiences would indicate that is the way it goes are we finding large numbers of individuals who are millionaires  who have large sums who are able to get around the requirements and are inappropriately receiving medicaid mister davis as i just explained the egregious medicaid planning of the millionaires that is just the tip of the iceberg what gao looked at was just one technique of medicaid planning transfer of assets  that is not even the most common form of medicaid planning there are annuities life care contracts the reverse half a load strategy using promissory notes there are any number of ways to get people  qualified but the transfer of assets technique minor as it is is still a one dollar billion a year according to gao as i cannot reiterate enough the real problem is that most people dont have to use fancy legal planning because they are eligible anyway this has the effect of having sent the message since one thousand nine hundred and sixty five when medicaid became part of the law to the public that you can ignore the risk of long term care you dont have to save invest or insure for the risk and when the time comes may be you die with your boots on and you are home free but if you do get one of the chronic illnesses of old age alzheimers parkinsons and stroke and you need the expensive care families who provide eighty percent as you said in your opening remarks of the care for free if you have to have the expensive care then virtually everyone ends up on medicaid the program cannot sustain that weight now so the secret is to target it to the people who need it most and thereby insure a quality safety net for the dorfman millionaires dont want medicaid millionaires still have other law planning issues but not medicaid planning issues they want fancy care they want care that they control they want to be able to fire the people they dont like and hire the people they do like millionaires never come in for medicaid planning they do want planning they do need surrogate decision makers as they suffer the illnesses of aging but they dont want medicaid ms eulau we find that about sixty percent of the people who come in for nursing home care have done some type of medicaid esta often but we still are seeing it because transfers if you transfer your money out of your control for community long term care there is no penalty we are seeing that as well may be about fifteen percent of the cases  soon as i joined aarp i started receiving invitations in the mail to come to free seminars to talk about medicaid estate planning  congressman davis what we are finding in illinois is that this is more of a middle class family issue than millionaires i agree with mister dorfman that the millionaires dont want to live in our medicaid nursing homes  go into nursing home care and it is eaten up almost immediately in nursing home care that is why in illinois we are struggling with our legislative rulemaking committee that there seems to be this widespread acceptance of that on behalf of middle class families and that is who they are representing but we are learning from other states and we think there are reasonable ways to impose and tighten the eligibility rules that we need to put in place immediately while also maintaining a better service delivery system and reducing the cost of long term care generally we are trying to do it at both ends because there are so many costs for low income people that are wasteful and unnecessary we could do a better job just by assets of a client that would qualify for medicaid that comes to you a typical client that comes to me has a home a coop a condominium worth approximately five hundred thousand dollars they have approximately one hundred thousand dollars in retirement savings standard for the community spouse in a nursing home care situation they are allowed to keep one hundred and nine thousand dollars of the combined resources and we very often find that it is significantly higher than that probably in illinois we really do have this institutional bias i guess there are some powerful special interests behind maintaining state operated facilities as well as nursing homes and that is why we really did over invest in those over time that we have fifteen thousand empty nursing home beds right now we paid three times as much at least to maintain someone per month in a nursing home bed than what we are providing with a limited set of services for seniors who stay at home  are really working on now is looking at how we could increase the package of services to keep people in their home to keep them from having to go into nursing homes which is obviously a much more expensive form of long term care doctor gosar if we paid for this are people who can maintain themselves in their home and have a higher quality of life at a much reduced cost and we are going to show not just cost neutrality but real savings in this arena doctor gosar but it doesnt exist mister moses can you actually answer that question am not aware of any state that has actually reduced the cost of long term care due to rebalancing there are certain countervailing factors to consider such as people would rather get their care at home you make a popular form of service delivery available under medicaid it creates a stronger incentive for people to find ways to qualify not to say we shouldnt provide home and community based care we should but you need to understand why we have an institutional bias in long term care that is because medicaid made nursing home care free in  resulted in there being no market for privately financed home and community based services that is why that infrastructure isnt out there it is why we are trying to retrofit the home and community based system satisfactory solution to expand home community based care under medicaid unless and until you get the eligibility hemorrhage that this hearing is about under control otherwise you just create more and more incentives for people to rely on medicaid the best way to get access to home and community based care is to be able to pay privately then you get red carpet access to the best possible care doctor gosar it is more about the qualifying than and most of these people are seniors it does work i just visited them about two weeks ago we just have to be innovative and i think you are going in the right direction mister moses you would moses you have scarce public welfare resources available all i am suggesting is that you target them to the people who are most in need and create incentives for the affluent and the middle class before they are too old and to is meant to sound like a think tank your bio also states that you have testified before most of americas state legislatures something that think tanks often do is that right mister moses yes mister cummings mister moses when i asked my staff to learn more about you to try to understand where you were coming from it seems that your views are really nothing more than the views of the insurance industry hardly a disinterested or objective observer isnt it true that the policy advocacy center you operate is  industry mister moses no the organization was originally certified as a c charitable nonprofit i didnt feel i could carry the overhead of that so i decided to become what i call a no profit because i was not being so used effectively i have become an advocate first as a federal employee working for the health care financing administration then for the inspector general writing national studies that have led to changes in federal law when i decided i couldnt get it done within the federal government i left to be on the outside but my mandate my mission is to preserve medicaid as a safety net for people who need it such as the people in th industrys top producer and isnt it true that in your fiscal year two thousand fund raising letter you assert the center would open the floodgates of demand for your products in your two thousand fund raising appeal were attempting to raise one dollar million and requested ten thousand dollars from brokers and twenty thousand dollars from small carriers will you provide this committee with a comprehensive list of donors to your organization  talking about eleven years ago that organization the center for long care financing doesnt exist anymore that was a c charitable nonprofit we are now a no profit as i explained and i do not have to and will not disclose all of my donors most of them about a third are individuals who just believe in what we are doing and make clearly we are facing federal deficits that are unsustainable we have health care programs that are in jeopardy whether it is medicare or medicaid i think what we are trying to do here today is preserve medicaid for those who really need it we have a large group in here  o should have been very interested in this because clearly those are the ones who need it for the past two decades as a primary care physician i have struggled with the frustration of getting care for people who really need it and everyone knows people getting it who dont need it  people being responsible for themselves and not relying on the federal government when they can afford to do it i applaud you and everyone here today trying to solve this problem because clearly our government cannot afford to pay long term care for everybody in this country  medicaid as a safety net for people in need unfortunately people in need dont have money to donate to organizations like mine the people who dont are the ones who might benefit from a change in medicaid policy that protects the program for the poor where would we go if there werent a five hundred thousand dollars home equity exemption families would tap their home equity after age sixty two through products like reverse mortgages which enable them to remain in the home and purchase that home and community based  we would rather people have once home equity becomes something that is at risk in case you have a long term care problem once medicaid stops being free inheritance insurance for the baby boom generation then the boomers will plan ahead and  be more likely to buy the insurance that enables them to pay privately if we could divert only twenty percent of the people who are likely to become the dual eligibles that only fifteen percent of the medicaid population but thirty nine percent of the cost desjarlais briefly the way things stand now with proper legal counsel somebody like bill gates or warren buffet could qualify for medicaid mister moses you could as long as you transferred all your assets five years in advance doctor desjarlais so there is means for people like that to do it long term care has assistance qualifying for medicaid long term care spouse in the community does not need care they then transfer that money out to their children prior to their death we cant go after the resources if there is a spouse in the community and desjarlais i was thinking about this hearing and the idea of getting people on insurance i think people are very nave i think a lot of people think medicare will pay for this do you think this would be an area that public service messaging if they knew this was going away and they didnt have this option public serving messaging to help get people to obtain long term health coverage be useful mister moses it cant hurt but the problem is the public doesnt fail to buy long term care insurance or plan for long term care  kaiser commission on medicaid and the uninsured the number one reason that people who shop for but do not buy long term care insurance is cost in two thousand and nine the kaiser report found long term care insurance premium costs vary significantly depending on the age of the purchaser for individuals aged sixty with no partner the annual premiums for a typical policy average two thousand three hundred and twenty nine dollars for a couple the same age premiums for the same policy design averaged three thousand and ninety six dollars combined for the two people if purchased at age seventy premiums would cost on average four thousand five hundred and fifteen dollars per year for an individual and six thousand and ten dollars for a married couple another kaiser study published in june of this year found that half of all medicare beneficiaries had incomes below twenty one thousand one hundred dollars in two thousand and ten furthermore many elderly individuals are already spending a significant amount of their income on health and six kaiser found that one in four medicare beneficiaries spent thirty percent or more of their income on health expenses and one in ten beneficiaries spent more than half of their income on health expenses ms hamos given that a significant number of medicare beneficiaries are already spending a large part of their relatively small income on you hit the nail on the head it is cost prohibitive but i think the key to long term care insurance is that young people need to buy it when it is affordable and they need to be thinking ahead to their own futures and their families futures young people as we all know dont think that way that is the big problem if people wait until they become seniors even middle age and close to being seniors i think most people dont start down that road because it is very expensive mister clay it is my understanding that long term care insurance premiums have increased significantly above the overall rate of inflation isnt it true ms hamos that from one thousand nine hundred and ninety five to two thousand  average age adjusted premiums have increased fifty nine percent above the overall rate of inflation for individuals aged fifty five to sixty four and by thirty two percent for those aged sixty five to sixty nine between two thousand and two thousand and five the more comprehensive policies which often included inflation protection raised premiums on average thirty percent have you found that in your studies is not my expertise at all but i have read those studies and i have learned that as well about long term care insurance we would all like to encourage more use of long term care insurance quite honestly i think if it is out there the insurance companies tell us there is not a robust market for it i think what we are hearing today is that in part because medicaid policy has impacted that but i would say part of the problem is that it is a costly purchase for a lot of low income and middle income families and they dont really think ahead far enough to be able to buy and hold on to it and maintain it throughout their lives that is why it is so cost prohibitive and that is why it is increasing because the insurance compan to perform an essential role that no one else can fill for reasons perceived by self interests do you normally disclose to congressional committees and state legislatures that you have testified before the details of your explained earlier i am not about selling insurance i am about saving medicaid the problem is as one of the testimonies explained between two thirds and ninety percent of the potential market for long term care insurance is crowded out by the availability of medicaid that was in the american economic research journal as long as that is the case as long as the public can payments the notion is that if you are doing medicaid planning and sheltering or divesting hundreds of thousands of dollars you dont want to end up in one of those awful medicaid nursing home he can keep his rich clients from having to stay in one of those horrible medicaid facilities mister moses this is routinely recommended in the elder law journal articles dont worry mister and misess client we can get you into a nice place because when we divest the rest  of your assets we will hold back fifty thousand dollars to one hundred thousand dollars so that you can pay privately for six months to a year why does that make a difference you will get red carpet access to the best quality care because nursing homes for example only get about two thirds from medicaid what you would get from a private pay resident so they will roll out the red carpet to attract people who can pay privately they may have only a few medicaid beds and be mostly private pay and medicare they are the real nice nursing homes and the elder law bar always knows which ones those are the problem is while the nicest beds and the best facilities are being filled by people who could have would have and should have paid their own way medicaid people the appropriate indigent people cant get into the nice places and they end up in the one hundred percent medicaid places that are the kind of places that goes in with the minicams showing people lying in their wealthy people dont have to wind up in those gosh awful medicaid facilities they can be at a super nice place if they just get the right legal counsel right mister moses a medicaid planner simply flips the switch the medicaid plan kicks in wheelchairs who are part of the disabilities community for a number of years now senator harkins and i have been working very hard trying to get something passed called community choice which would allow these individuals to live at home and still get the nursing care or the medical care they needed and not have to live in nursing homes to do so of course we have not fared very well with that legislation we have not been able to get it passed since we are looking for ways to save money from care the average cost is about seventy five thousand dollars a year if individuals could live at home and we pay for the medical services then it seems we would save a lot of money mister moses you would indeed target medicaid to the people who really need it and you will have more than enough resources to provide a full continuum of care from home community based care assisted living and nursing home care but only when it is needed spectrum an example of what it might do is take three senior veterans suffering from alzheimers and parkinsons put all three together in a community setting in someones home and pay them for providing care it cost a fraction of institutional care and is a model that could be replicated across the system to provide community care ms eulau new york has a waiver program a long term home health care program that services clients at home giving  cost more than seventy five percent of what it would cost in a nursing home setting we do try to do that could i also say that i dont really think in my county there are medicaid nursing home facilities that was surprising to hear every state really does have different experiences i wanted to reflect on the chairmans questioning before in our case in illinois there are some nursing homes that actually do figure out ways to kick out people when they  with their resources they figure out how to transfer them to hospitals and then dont invite them back it is risky to start out in the fancy nursing home and not know where your granny is going to be a year or ten months later i would say again yes sir without objection the individuals who need the government program set up for their benefit doctor gosar so it doesnt undermine personal responsibility and contributes to a free rider culture mister dorfman no not at all what it is doing is taking an individual in any circumstance and looking at what are the most responsible choices at that moment given the existing government program sometimes that means transferring the money to protect the wife who is still living at home when you need a nursing home of the expensive care later on it is not that the public knows all there is to know about long term care and plans to go on medicaid it is the fact that medicaid has always paid for most expensive long term care that has kind of desensitized the public to the risk that is why all the survey studies show that people are aware that they should have a plan for long term care but they think medicare covers it which doesnt but medicaid does and that is the simple basic fact that is you could change that we could preserve medicaid as a safety net for people in need and if you had to spend some of your own resources before you got help from the government as you do in england england only protects thirty eight thousand dollars worth of all assets including home equity if you had that in place then you would have a demand for planning saving investing and insuring doctor gosar ms eulau how would you feel s i just dont find you as a disinterested public policy expert expressing a personal opinion but in fact a paid long term the point is that kind of argument congressman clay is a logical fallacy it is called the ad homonym to attack somebody based on aspects other than the quality of their work i would encourage you to see the trends of what is going on in the states that they are quickly shirking their responsibility to take care of the disabled and the people that are older for whatever reason mister moses i spent thirty years my career trying to find ways to save medicaid for people in need the only tools i have are private sector industries that stand to gain from a system that would save medicaid for people in need if we save medicaid for people in need others the more affluent people will need to spend their money instead of hiring attorneys they will need to use their home equity through things like reverse mortgages so they can get quality care in the private market once their home equity is at risk they will see the need to buy the insurance and that will take some of the burden off the public programs currently unable to provide guaranteed access to quality care across the whole spectrum of care for people truly in need and we will increase the jobs in the private sector and the tax revenue that enables congress to do panelists it has been informative for all of us and we appreciate your expertise your professionalism and how you interacted with one another and especially how you have interacted with questioners with that the committee is a