Medicaid Long-Term Care: Information Obtained by States about Applicants' Assets Varies and May Be Insufficient
Released: 2012-08-27T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: Medicaid—a joint federal-state health care financing program for certain low income individuals—paid for nearly half of the nation’s $263 billion long-term care expenditures in 2010. To be financially eligible for Medicaid coverage for long-term care, applicants cannot have assets—income and resources—above certain limits. Federal law discourages individuals from artificially impoverishing themselves in order to establish financial eligibility for Medicaid. Specifically, those who transfer assets for less than fair market value during a specified time period—or “look-back” period—before applying for Medicaid may be ineligible for coverage for longterm care for a period of time. The DRA extended the look-back period to 60 months and introduced new requirements for the treatment of certain types of assets, such as annuities, in determining eligibility. States are responsible for assessing applicants’ eligibility for Medicaid, the criteria for which varies by state.

GAO was asked to provide information on states’ requirements and practices for assessing the financial eligibility of applicants for Medicaid long-term care coverage. GAO examined the extent to which states (1) require documentation of assets from applicants, (2) obtain information from third parties to verify applicants’ assets, and (3) obtain information about applicants’ assets that could be used to implement eligibility-related DRA provisions. From October 2011 to November 2011, GAO surveyed Medicaid officials from each of the 50 states and the District of Columbia. GAO also interviewed officials from CMS, the agency within HHS that oversees Medicaid.

section_title: What GAO Found
paragraphs: States reported requiring applicants to provide documentation for most of the 13 types of assets included in GAO’s survey.

States varied in the extent to which they obtained information from third parties to verify applicants’ assets. For example, all states conducted data matches with the Social Security Administration but used other sources to a lesser extent. While states’ implementation of an electronic asset verification system (AVS) was required on a rolling basis beginning in 2009, no state had fully implemented an AVS at the time of GAO’s survey. Among the implementation challenges reported by states were lack of resources and getting financial institutions to participate. Officials from the Centers for Medicare & Medicaid Services (CMS) were aware of states’ progress and challenges and told GAO that they regularly communicated with states on AVS implementation.

On the basis of states’ responses to questions about the extent of documentation required from applicants and information obtained from third parties, it is unclear whether some states obtain sufficient information to implement certain provisions of the Deficit Reduction Act of 2005 (DRA). For example, 31 states reported requiring less than 60 months of documentation from applicants and financial institutions. The results of GAO’s survey raise questions about states’ implementation of the DRA, but are not conclusive. CMS officials said that it is reasonable for states to only conduct reviews when there is reason to believe a transfer of assets occurred. GAO has additional work planned related to Medicaid long-term care financial eligibility.

States must balance the costs of eligibility determination efforts with the need to ensure that those efforts provide sufficient information to implement federal requirements. Given the complexities involved, it may be reasonable for states to adhere to a risk-based approach and focus their eligibility determination efforts on applicants who appear to be more likely to have assets or to have transferred assets that would make them ineligible. It is too early to assess the effectiveness of the AVS; its utility will ultimately depend on the breadth of the financial institutions participating and the depth of the information obtained.

The Department of Health and Human Services (HHS) concurred with GAO’s findings and commented that GAO’s comprehensive report will serve as a helpful resource for CMS and other interested parties.

section_title: Letter
paragraphs: Long-term care, particularly nursing home care, can be costly; in 2010,  the average annual cost for care in a nursing home was about $79,000.  Nearly half of the nation’s $263 billion long-term care expenditures in  2010 were paid by Medicaid, a joint federal-state health care financing  program that covers certain categories of low-income individuals. Long- term care expenditures represent a significant portion of total Medicaid  expenditures, comprising over one-quarter of the total $401 billion spent  in fiscal year 2010. As the number of elderly Americans continues to grow  and more individuals are likely to need long-term care, Medicaid spending  for long-term care services is projected to increase. In light of the  increased demand and associated burden that this places on already  strained federal and state resources, it is important to ensure that only  eligible individuals receive Medicaid coverage for long-term care.

Individuals applying for Medicaid coverage for long-term care must meet  certain financial and functional eligibility criteria. To meet the financial eligibility criteria, individuals must have assets that fall below established  levels, which vary by state, but are within standards set by the federal  government. Within the Medicaid program, assets have two broad  categories: income, which includes any funds received during a calendar  month that are used or could be used to meet food, clothing, or shelter  needs; and resources, which include anything owned, such as savings  accounts, stocks, or property, that can be converted to cash. Not all  assets are counted in determining financial eligibility for Medicaid. For  example, states generally exclude—within specified limits—the value of  an individual’s primary residence, car, and prepaid burial arrangements.  Additionally, federal law includes provisions to discourage individuals  from artificially impoverishing themselves—for example, by transferring  their assets to certain family members—in order to establish financial  eligibility for Medicaid. Specifically, those who transfer assets for less  than fair market value (FMV) during a specified “look-back” period—a  period of time before application in which an individual’s assets are  reviewed—may be deemed ineligible for Medicaid coverage for long-term  care for a period of time. The Deficit Reduction Act of 2005 (DRA), which  was enacted in February 2006, amended certain existing provisions  regarding asset transfers for less than FMV and introduced new  requirements related to financial eligibility for Medicaid coverage for long- term care. For example, the DRA extended the look-back period from   36 months to 60 months for transfers occurring on or after its enactment  and introduced new requirements regarding how certain types of assets,  such as an individual’s home, should be considered when determining  Medicaid eligibility.

As the day-to-day administrators of the Medicaid program, states are  responsible for assessing applicants’ financial eligibility for Medicaid  coverage for long-term care; that is, determining whether an applicant’s  income and resources are below the state-established standards, and  whether an applicant transferred assets for less than FMV during the  look-back period. Our prior work and the work of others found that the  proportion of applicants deemed to be financially eligible for Medicaid  coverage for long-term care varied both across and within states.

Given the potential for state variation, you asked us for information on  states’ requirements and practices for assessing the financial eligibility of  individuals applying for Medicaid coverage for long-term care, including  states’ implementation of relevant DRA provisions. In this report, we  provide details on the extent to which states: (1) require individuals to  document assets when applying for Medicaid coverage for long-term  care; (2) obtain information from third parties to verify applicants’ assets;  and (3) obtain information about applicants’ assets that could be used to  implement DRA provisions related to eligibility for Medicaid coverage for  long-term care.

To address all three objectives, from October 2011 through November  2011, we administered a web-based survey to Medicaid officials from  each of the 50 states and the District of Columbia.and precision of our survey questions, we interviewed officials from the  Centers for Medicare & Medicaid Services (CMS), the agency within the  Department of Health and Human Services (HHS) that oversees  Medicaid; interviewed Medicaid officials from 3 states; reviewed states’  Medicaid applications for long-term care coverage; and pretested the  survey with Medicaid officials from 3 states. The survey requested  information about the types of documentation, if any, that states require  applicants for Medicaid coverage for long-term care to submit for 13 types  of assets: earned income, unearned income, financial and investment  resources, life insurance, primary residence, real property other than  primary residence, vehicles, annuities, burial contracts and prepaid  funeral arrangements, continuing care retirement community (CCRC)

To ensure the clarity  entrance fees, life estates, promissory notes or loans, and trusts. In  addition, the survey asked about the number of months of documentation  states required for earned income, unearned income, and financial and  investment resources. The survey also asked about states’ practices to  obtain information from third parties to verify applicants’ assets, such as  whether, and to what extent, states conduct data matches with   10 sources, including the Social Security Administration and the Internal  Revenue Service, which primarily allow states to verify applicants’  income. Finally, the survey asked about any additional documentation  states require or additional steps states take to determine whether  applicants transferred assets for less than FMV during the 60-month look- back period. We received survey responses from officials from all   51 states, although not every official responded to every question. We  relied on the data as reported by the state officials who were identified as  the primary contact for states’ documentation requirements and practices  for verifying the financial eligibility of applicants for Medicaid coverage for  long-term care. We did not independently verify these data; however, we  reviewed all responses for reasonableness and internal consistency, and  followed up with state officials for clarification where necessary. On the  basis of these activities, we determined these data were sufficiently  reliable for the purposes of our report. In addition to administering a  survey, we collected states’ application forms for Medicaid coverage for  long-term care to assess the types of asset information asked about on  the applications. Finally, we interviewed CMS officials about federal  requirements related to eligibility determinations for Medicaid coverage  for long-term care, including the DRA provisions.

We conducted this performance audit from July 2011 to July 2012 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Long-term care includes many types of services needed by individuals  who have a physical disability, a mental disability, or both. Long-term care  services can be provided in a variety of settings, including an individual’s  home or an institution, such as a nursing home. To be eligible for  Medicaid coverage for long-term care, individuals must be within certain  eligibility categories—such as those that are aged or disabled—and meet  functional and financial criteria. Within broad federal standards, states  determine whether an individual meets the functional criteria for long-term  care coverage by assessing an individual’s ability to carry out activities of  daily living (ADL), such as eating and getting around the house; and  instrumental activities of daily living (IADL), such as preparing meals and  shopping for groceries. The financial eligibility criteria are based on  individuals’ assets—income and resources together. States are  responsible for determining whether applicants meet the financial and  other eligibility criteria for Medicaid coverage for long-term care.
subsections: section_title: Financial Eligibility for Medicaid Coverage for Long-Term Care
paragraphs: To qualify for Medicaid coverage for long-term care, individuals must  have assets that fall below established standards, which vary by state,  but are within standards set by the federal government. The Medicaid  program bases its characterization of assets—income and resources—on  that used in the Supplemental Security Income program. Income is  something received during a calendar month, paid either in cash or in- kind, that is used or could be used to meet food or shelter needs;  resources are cash or real or personal property that are owned that can  be converted to cash and be used for food or shelter. (See table 1 for  examples of different types of income and resources.) In establishing  policy for determining financial eligibility for Medicaid coverage for long- term care, states can decide, within federal standards, which assets are  countable. For example, states may disregard certain types or amounts of  income, and may elect not to count certain resources. In most states, to  be financially eligible for Medicaid coverage for long-term care, individuals  must have $2,000 or less in countable resources ($3,000 for a married  couple).

Federal law limits Medicaid payment for long-term care services for  persons who divest themselves of—or “transfer”—their assets for less  than FMV within a specified time period. As a result, when an individual  applies for Medicaid coverage for long-term care, states conduct a  review, or “look back,” to determine whether the applicant (or his or her  spouse, if married) transferred assets to another person or party. If the  state determines an applicant transferred an asset for less than FMV  during the look-back period, the individual may be ineligible for Medicaid  coverage for long-term care for a period of time, called the penalty period.  The DRA extended the look-back period for transfers made on or after  February 8, 2006, to 60 months; prior to that, it was generally   36 months.

The DRA also specified circumstances under which the purchase of  certain assets—such as an annuity, promissory note or loan, or life  estate—is considered a transfer for less than FMV, and when entrance  fees for CCRCs are countable for purposes of determining Medicaid  eligibility. Additionally, while an individual’s primary residence is generally  not a countable resource for determining Medicaid eligibility, the DRA  specified when an individual with substantial equity interest in his or her  home is to be excluded from eligibility for Medicaid payment for long-term  care; the amount of allowable equity interest is established by each state  within federal guidelines. See table 2 for a summary of these DRA provisions. Most, but not all, of these DRA provisions became applicable  on the date the law was enacted, February 8, 2006.

To assess applicants’ financial eligibility for Medicaid coverage for long- term care, and to determine whether they transferred assets for less than  FMV, states generally require applicants to submit applications and to  provide documentation of certain assets reported on the applications.  State Medicaid programs may also obtain information from third parties,  such as financial institutions or other government agencies, such as the  Social Security Administration. Such information helps states verify the  accuracy of applicants’ reported assets, as well as determine whether  applicants have assets they failed to report or transferred for less than  FMV during the look-back period. The processing of Medicaid  applications—including the collection of documentation and information  from applicants and third parties—is generally performed by local or  county-based eligibility workers.

In 2008, Congress passed legislation that required states to implement  electronic asset verification systems (AVS) to verify the assets of aged,  blind, or disabled applicants for Medicaid, including those seeking  Medicaid coverage for long-term care, with financial institutions. An AVS  would provide states with an electronic mechanism to contact multiple  financial institutions, including those not reported by an applicant, to  determine if an applicant has, or had, an account and the value of any  existing accounts. The law provides for states’ implementation of these  systems to occur on a rolling basis; the first systems were to be  implemented by the end of fiscal year 2009, with all states implementing  systems by the end of fiscal year 2013. (See table 3.)

section_title: States Required Applicants to Document Most Assets, but What Was Considered Acceptable Proof Varied
paragraphs: States reported requiring applicants to provide documentation for most of  the 13 types of assets contained in our survey; however, the types and  number of months of documentation that the states considered to be  acceptable proof for determining an applicant’s financial eligibility for  Medicaid coverage for long-term care varied. Specifically, 44 states  required documentation for at least 12 of the 13 types of assets. All states  reported requiring documentation of annuities, burial contracts and  prepaid funeral arrangements, financial and investment resources, life  estates, and trusts, while fewer states reported requiring documentation  of other types of assets. States were least likely to require documentation  of vehicles (38 states) and primary residence (37 states), resources that  states may choose not to count for purposes of determining financial  eligibility for Medicaid coverage for long-term care. (See fig. 1.)

Officials from several states reported not requiring documentation for a  particular type of asset because the state was able to obtain the  necessary information from a third party. For example, while 50 states  reported requiring applicants to submit documentation of earned income,  one state did not have such a requirement because the amount of earned  income was verified through an interface with the state’s Department of  Labor. It was less clear how states assessed other assets—such as  vehicles or CCRC entrance fees—absent documentation.

Our survey also showed that states varied in how they treated specific  types of documentation; that is, whether the documentation was required,  acceptable as proof by itself, acceptable as proof with other  documentation, or not acceptable as proof of an applicant’s assets. For  example, while states generally found a written statement of earnings  from an employer as acceptable documentation of earned income, there  was more variation in how they treated other types of documentation.  (See table 4.)

States also varied in the number of months of documentation required  from applicants, especially as it related to financial and investment  resources. Although all 51 states reported requiring documentation of  financial and investment resources, 27 required only current  documentation, while the remaining 24 required both current and past  documentation. Of the 24 states that required documentation of both  current and past financial and investment resources, most required   60 months of documentation, while the remaining states required fewer  months of documentation. (See fig. 2.) There was some variation, but to a  lesser extent, in the amount of documentation of earned and unearned  income that states required from applicants. Of the 50 states that required  applicants to provide earned income documentation, 47 required only  current documentation. Of the 3 remaining states, 2 required 3 months of  documentation and 1 required 2 months of documentation. Of the   49 states that required unearned income documentation, 47 only required  documentation of current unearned income. The other 2 states required   3 months of documentation.

In addition to the documentation required to assess whether applicants’  assets were within state financial eligibility levels, 38 states reported  requiring additional documentation from at least some applicants to  identify assets transferred for less than FMV. Of these 38 states,   16 indicated they required additional documentation only if an applicant  reported making a transfer, 5 reported doing so only if an applicant’s  information was questionable, and 8 reported both of these reasons. Of  the remaining 9 states, 7 required additional documentation from all  applicants, and 2 did not specify the circumstances that would result in a  request for additional documentation.

Appendix II provides additional information on states’ asset  documentation requirements for individuals applying for Medicaid  coverage for long-term care.

section_title: All States Obtained Some Amount of Asset Information from Third Parties, and No State Had Implemented an Asset Verification System
paragraphs: All 51 states reported that they obtained some amount of asset  information from third parties, although the extent of the screenings  conducted varied by state. No state had implemented an electronic AVS,  which would allow them to contact multiple financial institutions— including those not reported by an applicant—to determine the existence  and value of any accounts belonging to an applicant. States reported  challenges to implementing an AVS including not having sufficient  resources.
subsections: section_title: States Varied in the Extent to Which They Obtained Information from Third Parties
paragraphs: To varying degrees, states reported obtaining information from third  parties through a variety of mechanisms, including data matches, direct  contact with financial institutions, and property and vehicle records  searches. Some states also reported taking additional verification steps to  determine if an applicant transferred assets for less than FMV during the  look-back period.

All 51 states reported that they conduct data matches with the Social  Security Administration to verify at least some applicants’ assets.  However, states’ use of data matches with other sources of asset  information—primarily related to income—varied, ranging from 48 states  reporting data matches with state unemployment records, to as few as   6 states reporting data matches with state tax records. On average,  states conducted data matches with 6 of the 10 sources included in our survey; the number of sources states reported using ranged from 1 to 9.In addition to variations in the use of data match sources, states varied in  terms of the proportion of applicants screened, and when during the  eligibility process the state conducted the screen. For example, most  states reported conducting a data match with the Social Security  Administration generally before determining an applicant’s eligibility. In  contrast, of the 30 states that reported conducting a data match with the  Internal Revenue Service for at least some applicants, 21 reported doing  so generally after determining eligibility. (See table 5 for summary  information and app. III for more detailed information about the data  matches conducted by states.)

Twenty-four states reported that they contact financial institutions to verify  at least some applicants’ financial and investment resources, while the  remaining 27 did not. However, these 24 states varied in terms of the  range of financial institutions they contacted and the proportion of  applicants about whom they inquired. (See table 6.)

Some states reported contacting multiple types of financial institutions,  such as institutions applicants reported having accounts with, and some  that applicants did not report. However, 13 of the 24 states reported  contacting only financial institutions with whom the applicant reported  having an account; of these 13 states, 3 states contacted financial  institutions for all applicants, while the other 10 states did so for some  applicants. These 13 states, and the 27 that reported not contacting any  financial institutions, are unlikely to identify accounts that an applicant  failed to report. Of the remaining 11 states that reported contacting  financial institutions not reported by an applicant, 3 reported contacting  only local institutions, whereas the other 8 contacted a combination of  local, statewide, and national institutions. Regarding the proportion of  applicants for which states contact financial institutions, half of the   24 states reported they only contact financial institutions if an applicant  submits insufficient information or provides questionable information.

Of the 24 states that reported they contact financial institutions to request  information, the type of information—account balances or itemized  statements—and the number of months they request varied. (See fig. 3.)  Specifically, half of these states requested itemized statements that  include information on each transaction, while the other half requested  monthly account balances. Most of the states that requested account  balances did so for 3 or fewer months. Of the 12 states that requested  itemized statements, 5 requested 60 months of statements, 3 requested  only the statement for the current month, and the other 4 states requested  between 3 and 36 months of information.

Most of the states (20 of 24) reported that they contact financial  institutions for asset information before determining eligibility. Appendix IV  provides additional information about states’ contact with financial  institutions to verify applicants’ assets.

Thirty-five states reported that they conduct some type of property  records search to verify at least some applicants’ real property. The  extent of the searches varied in terms of the geographic area covered  and the proportion of applicants for which property searches were  conducted. (See table 7.)

Of the 35 states that reported conducting property searches, 2 states  conduct property searches only within an applicant’s county of residence.  Of the 33 states that reported conducting property searches beyond an  applicant’s county of residence, 8 do so only if they have reason to  believe the applicant lived in another county or state. Additionally, 12 of  the 35 states indicated they conduct property searches only when an  applicant submits questionable or insufficient information, an applicant  reports the property, or a combination of both factors.

States reported being able to conduct property searches using several  types of information, including an applicant’s name (33 states), property  address (32 states), property zip code (12 states), or an applicant’s Social  Security number (10 states). Most of the states (29 of the 35) reported  that they generally conduct property searches before determining  eligibility. Appendix V provides additional information about the property  searches conducted by states.

Thirty states reported that they conduct searches of Department of Motor  Vehicles’ (DMV) records to verify at least some applicants’ vehicles.  Specifically, 14 states reported conducting vehicle searches for all  applicants and 1 state reported conducting searches for most of its  applicants. The remaining 15 reported conducting such searches for less  than half of their applicants; of these 15 states, 6 indicated that they only  conduct searches of vehicle records if they receive information from an  applicant that they deem questionable. States reported being able to  search these records using several types of information, including an  applicant’s name (29 states), a vehicle identification number (20 states),  and an applicant’s driver’s license or license plate number (18 states  each). Most of the states (25 of the 30 states) reported that they generally  conduct DMV searches before determining eligibility. Appendix VI  provides additional information about the vehicle searches conducted by  states.

Twenty-two states reported taking additional steps to obtain information  from third parties, such as conducting additional property searches, to  identify assets transferred for less than FMV; 7 states reported doing this  for all applicants; and 15 states reported doing this for some applicants.  Of the 15 states that reported taking additional verification steps for just  some applicants, most of them indicated they do so only if they question  the information provided by applicants or have reason to believe a  transfer may have occurred, such as if an applicant reported making a  transfer. Appendix VII provides information on the proportion of applicants  for which each state reported taking additional verification steps to identify  assets transferred for less than FMV during the look-back period.

section_title: No State Had Implemented an Asset Verification System to Obtain Information from Financial Institutions
paragraphs: Although 25 states were supposed to have implemented their electronic  AVS to obtain information from financial institutions by the end of fiscal  year 2011, no state had implemented one at the time of our survey.  Eighteen states reported that they were in the process of implementing an  AVS, while the remaining 33 states had yet to begin implementation.

When asked about the challenges to implementing an AVS, 32 states  reported that they did not have enough resources—such as money, staff,  or time—required to implement such a system, and 18 states reported  that it had been or would be challenging to get financial institutions to  participate and provide information. One state reported that it had initially  planned to have its AVS implemented by December 2011, but was unable  to do so because financial institutions in the state were unwilling to  participate in the AVS until state legislation is passed that releases the  financial institutions from any liability, ensures they are fairly reimbursed  for their services, and makes the process voluntary. The state Medicaid  program is seeking such legislation during the state’s 2012 legislative  session and then plans to proceed with implementing its AVS.

CMS acknowledged that states may have challenges that could affect  their ability to implement an AVS as scheduled. CMS officials were aware  of states’ progress in implementing the AVS and told us that the agency  was regularly communicating with states regarding AVS implementation.

section_title: It Is Unclear Whether Some States Obtain Sufficient Information to Implement Certain DRA Provisions
paragraphs: On the basis of states’ responses to questions about the documentation  required from applicants and the asset information obtained from third  parties, it is unclear whether some states obtain sufficient information to  implement certain DRA provisions, particularly the provisions related to  the look-back period and home equity. The results of our survey raise  questions about some states’ implementation of the DRA, but are not  conclusive, and we have additional work planned related to Medicaid  long-term care financial eligibility.

Look-back Period. We asked states about (1) the number of months  of financial and investment resources documentation required to  determine eligibility, (2) additional documentation required to identify  assets transferred for less than fair market value, and (3) number of  months of documentation obtained directly from financial institutions.  When considering states’ responses to those questions, we found that  31 states reported obtaining less than 60 months of information about  at least some applicants’ assets. Three of the 31 states reported  requiring a single month of documentation from applicants and did not  obtain any information from financial institutions. CMS officials noted  that it is costly and time consuming to conduct a review for the   60 month look-back period. Thus, these officials stated, it was  understandable for states to use discretion and only conduct reviews  when there is reason to believe that a transfer could have been made  during the look-back period. For example, a state might determine the  need to conduct a more thorough review as a result of red flags found  through other checks, such as when an applicant has very high  income and no resources. However, the application forms in 6 of the  31 states did not ask about transfers made during the entire look-back  period. Thus, it is unclear how these 6 states would know whether  assets were transferred for less than FMV in the 60 months prior to  application, and how all 31 states would be able to detect unreported  transfers of assets made during the entire look-back period. In  contrast, 20 states reported requiring 60 months of documentation  from all applicants, 5 of which also requested 60 months of  information from financial institutions for at least some applicants.

Home Equity. Fourteen states reported not requiring documentation  of a primary residence. Of these 14 states, 8 indicated that they  conduct property record searches in the county of residence for at  least some applicants to try to obtain information about property the  applicant may own. Additionally, 1 state indicated that it could obtain  information about an applicant’s primary residence from a third  party. The remaining 5 states reported they did not conduct property  records searches; as such, it is unclear how these states would  determine if an applicant owns a home that he or she failed to report,  and the value of an applicant’s equity interest in the home. Of the   37 states that reported requiring applicants to submit documentation  of a primary residence, only 3 reported requiring documentation that  could provide the state with information on the value of the home or  an applicant’s equity interest in the home. The remaining   34 states reported requiring documentation about applicants’ primary  residence, but the documentation received may not provide all of the  information necessary to determine if applicants’ equity interest in  their homes exceeds the state’s allowable amount.

Life Estates. Among the 32 states that provided information on our  survey about life estates, 2 states reported not assessing the length of  time an applicant with a life estate resided in the property. The  remaining 30 states reported requiring some type of proof in order to  determine the amount of time an applicant resided in the property  after the purchase of the life estate interest. On the basis of our  analysis of state responses, 7 of the 30 states reported relying only on  a statement from an applicant or another person who owns the  residence to determine the length of time an applicant resided in the  property; however, 2 of these 7 states said that they would require  more documentation if they determined that the information they  received was questionable. The remaining 23 states reported relying  on documentation, such as a utility bill; a statement from an applicant;  a statement from a third party; or some combination of these sources  to determine the length of time an applicant lived in the property.

CCRCs. On the basis of our survey results, most states—46 of   51—reported requiring applicants to provide documentation of CCRC  or life care community entrance fees, such as a copy of the contract  or agreement. Thus, these states should have sufficient information to  determine if, under the DRA, an applicant’s entrance fees should be  countable resources for determining Medicaid eligibility. However, it is  unclear how the remaining 5 states would be able to determine if an  applicant has paid such fees, and whether they should be counted  toward the applicant’s Medicaid long-term care eligibility  determination.

Promissory Notes. Fifty states reported on our survey that they  require applicants to provide documentation of promissory notes or  loans; such documentation should allow the state to determine if a  note meets the requirements specified in the DRA, such as providing  for payments to be made in equal installments throughout the course  of the loan, or if a note should be treated as a transfer of assets for  less than FMV.

Annuities. In responding to our survey, all states reported requiring  documentation of annuities and thus should have sufficient  information to determine whether an annuity should be considered a  transfer of assets for less than FMV under the DRA. Additionally, our  review of 49 states’ long-term care application forms found that   45 required the disclosure of any interest the applicant or spouse has  in an annuity and 27 contained statements regarding the state  becoming a remainder beneficiary of such annuities. (See app. VIII.)

section_title: Concluding Observations
paragraphs: As the demand for long-term care services increases and federal and  state resources continue to be strained, it is important to ensure that only  eligible individuals receive Medicaid coverage for long-term care. Since  each state is responsible for day-to-day implementation of its Medicaid  program, variation in policies and practices for determining financial  eligibility is expected. However, some of the variation we found may raise  questions regarding how states determine Medicaid eligibility for long- term care and enforce certain provisions of the DRA.

States must balance the costs of eligibility determination efforts with the  need to ensure that those efforts provide sufficient information to  implement federal requirements. While third-party verification of  applicants’ financial information likely provides states with the best  assurance of having a complete picture of an applicant’s financial status,  it can be a complex and costly process that requires a significant amount  of information and review. Given the complexities involved, it may be  reasonable for states to adhere to a risk-based approach and focus their  eligibility determination efforts on applicants who appear to be more likely  to have assets or to have transferred assets that would make them  ineligible. The electronic AVS that is required by law may help states  identify some unreported or transferred assets. However, it is too early to  assess its overall effectiveness, which will ultimately depend on the  breadth of the financial institutions participating and the depth of the  information obtained.

section_title: Agency Comments
paragraphs: We provided a draft of this report to HHS for its review, and HHS provided  written comments (see app. IX). HHS concurred with our findings and  noted that the results of our comprehensive report will serve as a  resource for all interested parties. Further, HHS indicated that the report  will be helpful for targeting CMS’s ongoing technical assistance and  oversight efforts with states.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Administrator of CMS  and other interested parties. In addition, the report will be available at no  charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix X.

section_title: Appendix I: GAO Analysis of State Applications

section_title: Appendix II: States’ Asset Documentation Requirements
subsections: section_title: Table 10a: Applicant Documentation Requirements for Medicaid Long-Term Care, by State and Type of Asset, 2011

section_title: Earned income
paragraphs: State reported it did not count a primary residence when determining an applicant’s eligibility—and  therefore did not require documentation—if an applicant was living in the home or intended to return  home.  State reported it did not require documentation of primary residence unless it appeared as though  the primary residence could exceed the allowable amount of equity interest.  State reported it did not require documentation of primary residence because it was not countable  when determining an applicant’s eligibility.  State reported it did not count a primary residence when determining an applicant’s eligibility—and  therefore did not require documentation—if an applicant’s spouse, child under 20 years old, or  disabled child was living in the home.  State reported requiring documentation of vehicle loan value only if it affected eligibility  determination.  State reported requiring documentation of a life insurance policy if the applicant reported that it had a  face value of $10,000 or more.

State reported it did not require documentation of primary residence unless the applicant reported  the value of the residence was within $200,000 of the allowable amount of equity interest.

section_title: Table 10b: Applicant Documentation Requirements for Medicaid Long-Term Care, by State and Type of Asset, 2011 (continued)

section_title: State Ohio

section_title: Earning
paragraphs:  = Required.   = Acceptable as proof by itself.   = Acceptable as proof with other documentation.   = Not acceptable as proof.  — = Response not provided.

section_title: Table 14a: States’ Treatment of Unearned Income Documentation, by State and Type of Documentation, 2011

section_title: Statement or
paragraphs:  = Required.   = Acceptable as proof by itself.   = Acceptable as proof with other documentation.   = Not acceptable as proof.  — = Response not provided.

section_title: Table 14b: States’ Treatment of Unearned Income Documentation, by State and Type of Documentation, 2011 (continued)

section_title: Itemized bank
paragraphs:  = Required.   = Acceptable as proof by itself.   = Acceptable as proof with other documentation.   = Not acceptable as proof.  — = Response not provided.

section_title: Bank
paragraphs:  = Required.   = Acceptable as proof by itself.   = Acceptable as proof with other documentation.   = Not acceptable as proof.  — = Response not provided.

Rhode Island  South Carolina  South Dakota  Tennessee  Texas  Utah  Vermont  Virginia   = Required.   = Acceptable as proof by itself.   = Acceptable as proof with other documentation.  — = Response not provided.

section_title: Property deed
paragraphs:  = Required.   = Acceptable as proof by itself.   = Acceptable as proof with other documentation.   = Not acceptable as proof.  — = Response not provided.

section_title: Property deed
paragraphs:  = Required.   = Acceptable as proof by itself.   = Acceptable as proof with other documentation.   = Not acceptable as proof.  — = Response not provided.

section_title: Vehicle title
paragraphs:  = Required.   = Acceptable as proof by itself.   = Acceptable as proof with other documentation.   = Not acceptable as proof.  — = Response not provided.

section_title: Appendix III: States’ Use of Data Matches to Verify Applicants’ Assets
subsections: section_title: Table 27a: Proportion of Applicants for which States Conduct Data Matches with Third Parties to Verify Applicants’ Assets, by State and Source of Data Match, 2011

section_title: Social Security Administration
paragraphs:  = All applicants.   = Most (more than half) applicants.   = Some applicants.   = No applicants.  — = Response not provided.

section_title: Table 27b: Proportion of Applicants for which States Conduct Data Matches with Third Parties to Verify Applicants’ Assets, by State and Source of Data Match, 2011 (continued)

section_title: Internal Revenue
paragraphs:  = All applicants.   = Most (more than half) applicants.   = Some applicants.   = No applicants.  — = Response not provided.

section_title: Table 28a: Timing of State Data Matches in Relation to Eligibility Determination, by State and Source of Data Match, 2011

section_title: Social Security Administration
paragraphs:  = Generally before eligibility determination.   = Sometimes before and sometimes after eligibility determination.   = Generally after eligibility determination.

N/A = Not applicable, state did not conduct data match with respective source.  — = Response not provided.

section_title: Table 28b: Timing of State Data Matches in Relation to Eligibility Determination, by State and Source of Data Match, 2011 (continued)

section_title: Internal Revenue
paragraphs:  = Generally before eligibility determination.   = Sometimes before and sometimes after eligibility determination.   = Generally after eligibility determination.

N/A = Not applicable, state did not conduct data match with respective source.  — = Response not provided.

section_title: Appendix IV: States’ Contact with Financial Institutions to Verify Applicants’ Assets
paragraphs: Appendix IV: States’ Contact with Financial  Institutions to Verify Applicants’ Assets State  Alaska  Arizona  Connecticut  Illinois  Indiana  Kentucky  Louisiana  Maine  Maryland  Michigan  Missouri  New Jersey  New York  Rhode Island  South Carolina  Texas  Vermont   = All applicants.   = Most (more than half) applicants.   = Some applicants.   = No applicants.  — = Response not provided. — = Response not provided.  = Generally before eligibility determination.   = Sometimes before and sometimes after eligibility determination.   = Generally after eligibility determination.

section_title: Appendix V: States’ Use of Property Records Searches to Verify Applicants’ Assets
paragraphs: Appendix V: States’ Use of Property Records  Searches to Verify Applicants’ Assets State  Alabama  Alaska  Arizona  Colorado  Connecticut  Delaware  Hawaii  Illinois  Iowa  Kansas  Kentucky  Louisiana  Maine  Maryland  Michigan  Mississippi  Missouri  Montana  Nevada  New Hampshire  New York  North Carolina  Ohio  Oklahoma  Oregon  Pennsylvania  Rhode Island     = All applicants.   = Most (more than half) applicants.   = Some applicants.   = No applicants.  — = Response not provided. —  — = Response not provided.  = Generally before eligibility determination.   = Sometimes before and sometimes after eligibility determination.   = Generally after eligibility determination.

section_title: Appendix VI: States’ Use of Vehicle Records Searches to Verify Applicants’ Assets
paragraphs: Pennsylvania  Rhode Island  South Carolina   = All applicants.   = Most (more than half) applicants.   = Some applicants.   = No applicants.
subsections: section_title: Total
paragraphs: — = Response not provided.  = Generally before eligibility determination.   = Sometimes before and sometimes after eligibility determination.   = Generally after eligibility determination.

section_title: Appendix VII: States’ Collection of Third- Party Information to Identify Transfers of Assets
paragraphs: Rhode Island  South Carolina  South Dakota  Tennessee  Texas   = All applicants.   = Some applicants.   = No applicants.  — = Response not provided.

section_title: Appendix VIII: GAO Analysis of Annuity Language Contained in States’ Application Forms
paragraphs: Appendix VIII: GAO Analysis of Annuity  Language Contained in States’ Application  Forms ●  Application form contained language regarding  Name the state as a remainder  27  State collected information from applicants through an interview rather than a paper application form.

section_title: Appendix IX: Comments from the Department of Health and Human Services

section_title: Appendix X: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Michelle B. Rosenberg, Assistant  Director; Emily Binek; Julianne Flowers; Kaycee M. Glavich; Shirin  Hormozi; Emily Loriso; Christina Ritchie; and Phillip J. Stadler made key  contributions to this report.


Question-summary annotations: questions: question: How did states vary in how they obtained third party information for Medicaid?
answer: States varied in the extent to which they obtained information from third parties to verify applicants’ assets. For example, all states conducted data matches with the Social Security Administration but used other sources to a lesser extent.

question: Why was AVS not fully implemented by states?
answer: While states’ implementation of an electronic asset verification system (AVS) was required on a rolling basis beginning in 2009, no state had fully implemented an AVS at the time of GAO’s survey. Among the implementation challenges reported by states were lack of resources and getting financial institutions to participate.

question: What did officials from CMS tell GAO?
answer: Officials from the Centers for Medicare & Medicaid Services (CMS) were aware of states’ progress and challenges and told GAO that they regularly communicated with states on AVS implementation.

questions: question: Why is it unclear whether states obtained sufficient information to implement DRA provisions?
answer: On the basis of states’ responses to questions about the extent of documentation required from applicants and information obtained from third parties, it is unclear whether some states obtain sufficient information to implement certain provisions of the Deficit Reduction Act of 2005 (DRA).
child_questions: question: How has uncertainty about implementation been raised?
answer: The results of GAO’s survey raise questions about states’ implementation of the DRA, but are not conclusive.

question: Why has uncertainty about implementation been raised?
answer: For example, 31 states reported requiring less than 60 months of documentation from applicants and financial institutions.

question: What do CMS officials believe is reasonable for states to do?
answer: CMS officials said that it is reasonable for states to only conduct reviews when there is reason to believe a transfer of assets occurred.

question: What plans does GAO have?
answer: GAO has additional work planned related to Medicaid long-term care financial eligibility.

questions: question: How should states implement federal Medicaid requirements?
answer: States must balance the costs of eligibility determination efforts with the need to ensure that those efforts provide sufficient information to implement federal requirements.
child_questions: question: Why might states use a risk-based approach for implementing Medicaid requirements?
answer: Given the complexities involved, it may be reasonable for states to adhere to a risk-based approach and focus their eligibility determination efforts on applicants who appear to be more likely to have assets or to have transferred assets that would make them ineligible.

question: How will effectiveness of AVS be determined?
answer: It is too early to assess the effectiveness of the AVS; its utility will ultimately depend on the breadth of the financial institutions participating and the depth of the information obtained.

questions: question: What is Medicaid?
answer: Medicaid—a joint federal-state health care financing program for certain low income individuals—paid for nearly half of the nation’s $263 billion long-term care expenditures in 2010.
child_questions: question: How can people be eligible for Medicaid?
answer: To be financially eligible for Medicaid coverage for long-term care, applicants cannot have assets—income and resources—above certain limits.

question: How can people be ineligible for Medicaid?
answer: Federal law discourages individuals from artificially impoverishing themselves in order to establish financial eligibility for Medicaid. Specifically, those who transfer assets for less than fair market value during a specified time period—or “look-back” period—before applying for Medicaid may be ineligible for coverage for longterm care for a period of time.

question: What changes did DRA bring?
answer: The DRA extended the look-back period to 60 months and introduced new requirements for the treatment of certain types of assets, such as annuities, in determining eligibility.

question: What entity is responsible for assessing applicant eligibility?
answer: States are responsible for assessing applicants’ eligibility for Medicaid, the criteria for which varies by state.

questions: question: What was GAO asked to provide?
answer: GAO was asked to provide information on states’ requirements and practices for assessing the financial eligibility of applicants for Medicaid long-term care coverage.
child_questions: question: What did GAO examine?
answer: GAO examined the extent to which states (1) require documentation of assets from applicants, (2) obtain information from third parties to verify applicants’ assets, and (3) obtain information about applicants’ assets that could be used to implement eligibility-related DRA provisions.

question: How did GAO obtain information?
answer: From October 2011 to November 2011, GAO surveyed Medicaid officials from each of the 50 states and the District of Columbia. GAO also interviewed officials from CMS, the agency within HHS that oversees Medicaid.

question: What is CMS?
answer: GAO also interviewed officials from CMS, the agency within HHS that oversees Medicaid.