| April 23, 2013
Oklahoma Health Care Authority should stop expanding Medicaid
“Medicaid was established in 1965 with the worthy aim of providing medical care for the poor; it was never intended as a middle-class entitlement or as inheritance protection for the children of well-off seniors,” The Wall Street Journal has correctly observed (“Medicaid for Millionaires”).
Yet the latter is precisely what has happened — to the point that sheltering assets and income to qualify for Medicaid is now as routine as writing a will.
If you don’t believe us, Google “Medicaid estate planning” on the Web and see what pops up. There's a whole “elderlaw” industry out there dedicated to the children of seniors who want to make sure that other taxpayers, not they, pay for nursing-home care via Medicaid should mom or dad ever need it. As one advertiser puts it, “You can qualify for Medicaid while preserving most assets & savings!”
Such "asset-shifting" may be morally questionable, but in most cases it is entirely legal. Anyone can give away most of his assets and three years later become eligible for Medicaid with no questions asked. Or, since a home, business and car of unlimited value are excluded from the calculation of assets, someone who wishes to qualify for Medicaid may shield his money by remodeling his house, investing in the family business, or purchasing expensive cars that he then gives away to family members (the notorious “two Mercedes rule”). Term life insurance — also of unlimited value — is excluded as well.
Medicaid "planners" often counsel well-to-do clients to save enough money to pay for a year of care at a private, high-quality nursing home, which under federal law can't kick you out if you then switch over to Medicaid. As Stephen Moses of the Center for Long-Term Care Financing points out, "Poor people don't have key money, so they end up in the least desirable 100%-Medicaid facilities, while the lawyers' clients occupy the scarcer Medicaid beds in nicer nursing homes." About 70% of nursing-home patients are on Medicaid…”
A review of the most recent Oklahoma Health Care Authority (OHCA) annual report (page 42) shows that Oklahoma is not immune. The report proudly boasts, “SoonerCare funded 4,801,856 nursing facility bed days for SFY2012; this represents 67.2 percent of the total actual nursing facility occupied bed days in the state.”
Not all of these Oklahomans are poor. (Did you realize that a person can have up to $500,000 of equity in a home and still qualify for Medicaid?) And, regrettably, OHCA bureaucrats continue to expand Medicaid by whatever means possible. A new rule passed by the OHCA will increase the amount of income that a person can generate from a Medicaid Income Pension Trust, and still qualify for Medicaid. Previously, the aged, blind, and disabled recipients of Medicaid long-term care were limited as to the amount of monthly income from a Medicaid Income Pension Trust. But the new permanent rule passed by the OHCA increases this cap to “less than the average cost of nursing home care per month”! Rather than protecting the Oklahoma Medicaid program for the poor — ensuring that it’s a safety net for the truly needy (the original intention of Medicaid) — OHCA officials want to perpetuate the growing problem of Medicaid becoming an unsustainable middle-class entitlement.
In classic bureaucratic fashion, the rule was fast-tracked — allowing participants to enroll now so that it would be much harder politically for lawmakers to disapprove of the rule.
This rule change relating to Medicaid Income Pension Trusts has a host of problems. First, the OHCA estimates it will increase Medicaid costs by several million dollars annually. Given the OHCA’s track record of underestimating other expansion costs — and given the reality of declining federal reimbursements — state lawmakers should be very concerned.
Second, health care costs are already skyrocketing, and now, thanks to the OHCA, taxpayers will be fully exposed to the unchecked increases of health care costs as they relate to the eligibility guideline.
Third, this is yet another example of the government incentivizing families not to save for future needs (in this case, long-term care for family members) and provide for their own care.
Fourth, because it looked like opposition to the rule change was building because of costs to the state, OHCA officials have switched from their “poor suffering senior” pitch and now maintain that the state will actually make money by implementing this rule. Their explanation is that once “clawback” provisions are enacted, the scheme can be structured in such a way as to draw down a larger federal match, which actually results in the state “making money.” But this rationale is actually worse. The OHCA is advocating pillaging Oklahoma’s federal taxpayers in order to implement a program that would otherwise not exist if not for the dysfunction of the federal government. Apparently, OHCA officials don’t understand that it is not their job to run a long-term-care insurance program for the middle class, capitalized and funded on the backs of Oklahoma’s federal taxpayers.
It is abundantly clear that Oklahoma’s Medicaid program — already the state’s largest spending item, surpassing state spending on common education and higher education combined — needs intense oversight and scrutiny from lawmakers. They must exercise their authority to disapprove agency rules such as this.
Governor Mary Fallin and legislative leaders have remained steadfast in their decision to protect Oklahomans from Obamacare’s Medicaid expansion trap. After all, the costs and consequences of such an expansion would be numerous, resulting in more than $1.5 billion in increased costs borne by the state for the expansion. This at a time when our state’s Medicaid budget is already ballooning in size and cost, crowding out spending for other core services, spending more than $169 million for emergency care for patients, and causing cost-shifting — all while failing to fix the problem.
Given that Oklahoma is growing increasingly dependent on Medicaid, I will once again repeat what I never tire of repeating: Oklahoma Health Care Authority officials should focus on reforming Medicaid, not expanding it.