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Medicaid Planning Trend: Home Care Instead of Nursing Home Care

Plus, FREE Online CLE Class

In a post-pandemic environment, there is a major move afoot to transition from institutional setting care to Home and Community-Based Services (“HCBS”).

Nursing homes, on a whole, have never been a popular destination – more of a necessary evil. But the pandemic made this worse. Given that the elderly and frail were in the most affected population hit by Covid-19, institutional care settings – most especially nursing homes – became ground zero for the spread of infection and the lion’s share of pandemic-related deaths.

The ease at which a nursing home population can be negatively affected by the virus has clearly put a chilling effect on moving new residents into facilities. People are looking for any way possible to remain at home.

Medicaid is the single largest pay source for long-term care in the US. Over one-half of all facility care is paid for by Medicaid.  Medicaid is inherently biased towards nursing home care, since from its inception in 1965 the program was primarily designed to cover nursing homes as the only long-term care option.

HCBS care was an add-on to Medicaid that came much later in 1981. States were allowed to experiment with providing Medicaid coverage for HCBS care through home care or assisted living waivers under 42 USC Sec. 1915(c). Since then, all states have initiated some type of waiver program for HCBS, but the states lack the standardization of nursing home care Medicaid eligibility.

This has been mostly good for those in need of care, but the lack of standardization or lack of full funding has led to a number of downsides that have restricted nursing home patients from getting the HCBS care they needed.

HCBS Waiting Lists

The biggest problem with most HCBS programs is the lack of proper funding.  As a result, you have a managed care program like Florida’s.  A senior in need of care must be evaluated to get on the waiting list. The waiting list is triaged based upon the level of care and urgency that the person needs. Oftentimes, the wait for care can be over a year long.

Most people don’t go looking to get on a waiting list a year or two before they need care, they seek it out when it becomes necessary. Because a nursing home resident is prioritized for managed home care as a way to move expensive nursing home patients into less expensive homecare settings, nursing home patients jump the line.  This has not gone unnoticed. Some actively seek nursing home placement so they can move the priority of their case to the front of the line and go back home with Medicaid-covered home care services.

In states like Michigan, which has a limited number of MI Choice Waiver “slots” based on funding, a patient in need of care either gets a slot or is forced into a nursing home even when home care environment would be less restrictive and more cost-effective for the state. Nursing home level care coverage by Medicaid is an entitlement; whereas, HCBS waiver care is at the whim of the state budget allocation.

Strict Income Limits

For nursing home Medicaid, some states utilize an income cap to determine eligibility.  Income caps for nursing home eligibility can be defeated in each state that uses them by having an income trust (also known as a Qualified Income Trust or Miller Trust) to place income in. The income placed in the trust is disregarded for purposes of eligibility. That essentially means that for income-cap and non-income-cap states, the ultimate disqualifying factor is whether the patient has more income that the cost of care.  Since most do not, virtually everyone can qualify for Medicaid in a nursing home under the income standards – cap or not.

HCBS waiver care is a lot more restrictive in some states.  In many states, there is a strict income cap.  If an applicant has just one dollar more in income than the limit, they are denied care.  They are not allowed to spend down to the income limit.  Those patients are often forced into the nursing home simply because their income is over the cap, even though it’s dramatically less than the cost of care they need.

A good example of this is the Star Plus HCBS program in Texas.  Star Plus uses 300% of the Federal Benefit Rate as the income limit.  For 2021 the income cap is $2,328. If the patient has $2,329 or more in income, they simply do not qualify. On the other hand, if that same patient goes into a nursing home, they can put income into a Miller Trust and qualify for Medicaid coverage. The inability to use a Miller Trust to satisfy the Star Plus income cap forces those who have slightly higher income into nursing home facilities at a much higher expense to the state.

But some states have caught on and allow the Miller trust to be used. Arizona, for instance, allows for excess income to be placed into the Miller Trust to qualify a homebound patient eligibility for Arizona Long Term Care System (“ALTCS”) waiver care. New Jersey has also allowed the use of Miller Trusts to defeat the income cap for Assisted Living Waiver applicants.

Confusion About Availability

While there is substantial standardization of nursing home Medicaid programs, there are no two state HCBS waivers exactly alike.  States often run numerous different HCBS Waiver programs with varying degrees of eligibility and different targeted audiences.  What this causes is general confusion about what program is most suitable for the senior in need of care.

Typically, a state has at least an aged HCBS waiver program along with a Program All-Inclusive Care for the Elderly (PACE) program. Both have similar eligibility requirements but operate a little differently.  HCBS typically provides home care and some adult daycare only, which is usually limited in scope to a set number of hours based upon state expenditure caps and/or the applicant’s health needs.  The PACE program typically allows for a money-follows-the-patient approach and provides all health coverage for the patient regardless of which stage the patient is in.

Additionally, most states have expanded home care waiver programs that have a broader scope than just elderly. These can include, in some state, access to group homes.

Because most of these programs are accessed through different agencies, it leaves the aged consumer in need of direction and guidance to both determine which program makes the most sense and access the program through the strict eligibility requirements.

Community Spouse Protections

Spousal Impoverishment protections were created in the Medicare Catastrophic Coverage Act of 1988 (MCCA ’88) along with the first-ever lookback period and transfer of asset penalties. This affords protections to the at-home spouse when one spouse enters a nursing home.  However, there was a spotty application of spousal protections when a person stayed home and receives Medicaid-funded HCBS care.

The Affordable Care Act passed in 2010 required that all HCBS programs treat the non-Medicaid spouse as a “community spouse” even though both spouses technically live in the community.  This had the effect of extending uniformly, Medicaid protections to the non-recipient spouse in a home care or assisted living waiver care environment.

The only problem was that the provision mandating those protections had a 10-year sunset clause and needed to be renewed by subsequent legislation.  The Trump administration signed into law a few extensions that allow for the use of these protections when seeking HCBS care today. Further legislation has been proposed to make these protections permanent.

Estate Recovery Applies to HCBS Care

For those who are not aware of estate recovery, it is the program by which the state is allowed to recoup Medicaid expenditures for a patient from the patient’s estate after death.  Typically, the largest asset subject to recover is the patient’s house.  Estate recovery rules range from the most milquetoast recovery provisions in states like Pennsylvania, Michigan, Florida, and California to extremely aggressive in states like Missouri and New Jersey.

Most people think that estate recovery is limited to nursing home expenditures; however, states are required to recovery from anyone over the age of fifty-five who receives HCBS care as well.  So essentially, they’ll let a person stay in their home and receive home care coverage through Medicaid, but recoup those expenditures from the home’s value after the patient dies.  Recovery can be delayed if there is a spouse living in the home.

The net effect of HCBS estate recovery is that it makes the HCBS program the equivalent of a reverse mortgage, where equity is pledged to cover care expenses and collected by the state after the patient has died. There are often advocacy tools that can be used during the eligibility process to either avoid or minimize the effect of estate recovery when a patient seeks HCBS care. The goal of a Medicaid Planner in these types of cases is to maximize the availability of the patient to stay at home with Medicaid-funded care while protecting the assets exposed to either the spenddown or estate recovery.

New Federal Proposal

As part of the initial Biden infrastructure program called “the American Jobs Plan,” $400 billion would go towards providing a wider access to HCBS care. While this bill is still in the early stages, there seems to be bipartisan support for enhancing patients’ abilities to access HCBS care by making the programs more robust and giving states the money to fully fund programs so as to avoid the imposition of waiting lists.

This will expand the range of services that an average senior will be able to access, making it more likely that they will be able to stay at home with an appropriate level of care.  What this will also do is expand the need for advisors, Medicaid Planners, in particular, to dig into the nuances and complexities of these HCBS programs and be creative in developing eligibility strategies.

Free Online CLE Class

To help you get a better idea of the HCBS Medicaid landscape, you are invited to join us for a FREE one-hour class that is CLE eligible. This class will be offered to attorneys and non-attorneys who are in the Medicaid Planning space or are looking into entering the field.

The 1-hour online CLE class entitled “Medicaid Planning: Intro to Medicaid Home Care” will be held June 4th, 2021 at 1:00 pm ET. For those able to attend the live program, the video will be available on-demand for all who register prior to the presentation.