Tag Archives: age wave

No More Medicaid as Middle-Class Entitlement

Woo! Hoo! Love that Medicaid!

Woo! Hoo! Love that Medicaid!

by James A. Bacon

When legislators debate expansion of Virginia’s Medicaid program in the 2014 session, they would do well to consider the long-term outlook for Medicaid spending. The program already consumes 17% of the state’s general fund budget, and that percentage will grow relentlessly as the population ages.

“Virginia faces an onslaught of frail and infirm elders as the demographic wave of aging baby boomers advances,” warns a new study, “The Index of Long-Term Care Vulnerability: A Case Study in Virginia,” written by the Center for Long-Term Care Reform and presented by the Thomas Jefferson Institute for Public Policy. “Virginia’s risk is greater than most. The commonwealth’s 142,000 citizens over age 85 will more than quadruple by 2050 at a rate (307%), seventh highest in the nation.”

One in five seniors will require long-term care of five years or more. The cost is phenomenally expensive, ranging from $41,000 yearly to live in an assisted living facility to $83,000 a year for a semi-private room in a nursing home (and even more for a private room).

Making the problem worse, Medicaid is evolving from a safety net for the destitute into a middle-class entitlement, as lawyers counsel seniors on how to avoid paying down their estates in order to qualify for Medicaid-funded long-term care. While Virginia eligibility rules are relatively strict, it has loopholes big enough to push a gurney through.  States the report:

Virginia Medicaid has to cope with sophisticated legal techniques used by elder laws specialists to artificially impoverish their relatively prosperous clients in order to qualify for Medicaid. These include the use of promissory notes, Medicaid-compliant annuities, life estates and savings bonds used to shelter or divest often hundreds of thousands of dollars.

The authors quote a Fairfax County Medicaid worker: “Medicaid is a program that pays for pretty much anyone who needs care and knows how to get it, not just for the poor.” Virginia is already a leader in shifting long-term care from institutions to home and community-based services and in using managed care to control costs — two reasons why, in addition to relatively strict eligibility standards, the Commonwealth has one of the most frugal Medicaid programs in the country.

Nevertheless, Virginia still faces horrendous budget increases. The report suggests that legislators reverse the trend of relying ever more heavily upon Medicaid to fund the population’s long-term care needs. The state should restrict Medicaid assistance to the truly indigent by tightening eligibility standards and requiring middle-class and affluent Virginians to fund their own care.

  • Asset spend down. Medicaid requirements should make Virginians spend down their assets before going on public assistance. The state could look at Virginia’s home equity exemption of $536,000, which is higher than most other states.
  • Home equity conversion. More than two-thirds of Virginians own their own homes, which have a median value of $254,600. Reverse mortgages allow people to extract equity from their homes while continuing to live in them. That money could be used to fund home- and community-based services privately.
  • Estate recovery. Where Medicaid does allow people to retain substantial wealth, at the very least their estates should reimburse the program for the cost of their care upon death. The feds haven’t published recovery data since 2005 (based on 2004 data) but Virginia recovered only $777,000 that year, or about 0.1% of expenditures. If it boosted recovery to the 5.8% benchmark in Oregon, it could collect more than $50 million a year.
  • Long-term care insurance. The state does offer a 15% state income tax credit for the purchase of long-term care insurance but it discourages the purchase of insurance by making Medicaid so easy to obtain. Tighter eligibility standards would encourage more people to take out insurance.

While the federal government will pay 90% of the cost of expanding Virginia’s Medicaid program to provide health care to the w0rking-age near-poor, the Commonwealth is in no position to accommodate an expansion of the program without reining in future long-term care liabilities. Taxpayers cannot afford to allow the program to morph into an entitlement for the middle class.

What Are Those Dag Nabbed Old Folks Doing Now?

Map credit: StatChat

Map credit: StatChat

Virginia typically ranks well in lists of top states for retirees, observes Hamilton Lombard at the StatChat blog, but more 65- to 74-year-olds left the state than moved in over the past decade. As for the college towns that are reputed to be such great retirement magnets, Blacksburg and Charlottesville haven’t seen much of an influx at all.

Still, Virginia’s old folks are on the move within the Commonwealth — to rural areas and exurbs mostly. Writes Lombard:

County level migration data also shows that retirees were more likely to move out of, rather than in to urban areas during the past decade, and this was true not only in large urban areas, but also in smaller cities such as Danville or Roanoke. Counties near urban areas experienced little growth in their retiree age population from in migration.

Instead, the counties with the largest growth of in-migrating retirees were rural, mostly east of the Blue Ridge, and within an hour of large urban areas.

Lombard suggests that retirees are drawn by the lower cost of living in the counties they are moving to. But he foresees problems. Seniors will continue to seek medical-center services in the major metropolitan areas, which requires driving lengthy distances. But driving becomes more problematic as elders age. “While both retirees and rural counties have benefited from recent trends,” he writes, “the next decades will present challenges as well to retirees and to the communities in which they live.”

– JAB

Another Free Market Innovation for the Age Wave

Interior view of a MedCottage. Photo credit: N2Care.

America’s population is aging rapidly, and so is the number of elderly who require assistance in daily living. Baby Boomers, to many of whom has fallen the responsibility of caring for aging parents, often find the alternatives unattractive. Nursing homes can be either too impersonal or too expensive. Caring for the parent at home is too burdensome, especially if both spouses work. Thanks to good ol’ American ingenuity, however, another option has emerged: the granny pod.

Roanoke-based N2Care, designer of the MedCottage, is one of several companies nationally that have begun selling high-tech cottages that families can install in the back yard. The MedCottage squeezes a bedroom, foyer, kitchenette and bathroom into a 288-square-foot modular unit and comes equipped with technology that allows granny to live more independently.

In the Washington Post, Frederick Kunkle describes the experience of Soccorrito Baez-Page and David Page in coaxing her 88-year-old mother, Viola Baez, into a MedCottage in their Fairfax County back yard. Viola’s separation from the rest of the family eliminates squabbles over noise, house temperature and privacy. Yet the close proximity allows family members to interact daily.

A “virtual companion” relays health-related messages, such as, “It’s time to take your medication.” A video system monitors the floor at ankle level to preserve privacy but lets caregivers know if there’s a problem. Pressurized ventilation maintains a pathogen-free environment. A lift attached to a track in the ceiling can help moving the patient from bed to bathroom. Floor lighting illuminates objects on the floor to reduce the risk of tripping, and a soft flooring material reduces the odds of serious injury.

The MedCottage doesn’t come cheap — it retails at $85,000 but with delivery and installation costs the family $125,000. On the other hand, the company offers financing and repurchase programs that make it far more affordable than assisted-living facilities that charge $40,000 or more year. While granny pods may not be suitable for everyone, they provide a significant new option that simply did not exist a couple of years ago.

Bacon’s bottom line: In some states the biggest barrier to the adoption of granny pods may not be the market — it could well be restrictive land use policies. Free-standing “granny flats” are outlawed in many jurisdictions by zoning codes or homeowners’ covenants. Granny pods represent a specially designed sub-set of the granny flat. As the United States braces for the age wave, there is no justification for barring granny pods. Their infirm elderly are not likely to crank up their stereos, throw wild parties, take up street parking or add to traffic congestion. Indeed, the structures are by their nature impermanent: Homeowners will remove them when they are no longer needed.

Fortunately, the General Assembly, in a rare instance of anticipating social change, passed a law in 2010 requiring Virginia zoning ordinances to permit  “temporary family healthcare structures” in single-family residential zoning districts. Kudos to Rep. Morgan Griffith, R-9th, who shepherded the law through the legislature before his election to the House of Representatives.

– JAB

IG of the Day: Projecting Virginia’s Age Profile

Graphic credit: Weldon Cooper Center

As the massive Baby Boomer generation achieves senior citizen status, as people live longer and as birth rates stagnate, Virginia’s demographic pyramid won’t look very pyramidal anymore. In the future there will be a whole lot more old people, transforming the pyramid into more of a column. Yup, the geezers will be out there, driving slow and holding up traffic, doddering down the sidewalk with their walkers, blocking your way in the grocery store aisles. Grrrr. Makes you so mad…

Oh, yeah… 10 to 20 years from now, I’ll be the one holding up traffic and fishing for change in the checkout lane. Hey, what’s your hurry, buster?

This chart, based on the latest projections of the Weldon Cooper Center for Public Service, provides the latest look at what Virginia’s age profile will look like in 2020 and 2040. None of this new — the age wave is the slowest-moving tsunami in history. But it moves so slowly that we tend to forget about it, and nothing gets done to prepare.

Will we be ready?

– JAB