Federal Law Requires That All States Implement Policies to:

1) Prevent persons who could otherwise pay for at least some of their care from giving away/divesting their assets to meet Medicaid financial eligibility criteria. (Referred to as "Transfer of Asset" policies -- imposed in 1988.)

2) Recoup, from estates of deceased Medicaid beneficiaries age 55+ (and permanently institutionalized adults under 55), Medicaid payments for long-term care services as well as any related hospital, prescription drug and Medicare cost-sharing costs. (Referred to as Estate Recovery policies-- imposed in 1993)

A Quick Overview of Transfer of Asset Requirements

¨ States must apply policies to Medicaid funded nursing home care (includes ICF-MR) and all home and community based waiver programs.

¨ States must determine whether an applicant has transferred any assets within 36 months of applying for Medicaid or established, within the past 60 months, a Trust from which the applicant cannot benefit. (These time frames are commonly referred to as the "look back" period.)

¨ States must impose penalties on Medicaid long-term care applicants that violate the look back criteria above.

¨ States may opt to apply their policies to other long-term care related services.

¨ States may not lengthen the 36 month "look-back" period.

 A Quick Overview of Estate Recovery Requirements

¨ Recovery efforts must apply to persons 55 and older (and permanently institutionalized adults under age 55) receiving Medicaid funded nursing home care or care through home and community based waivers, including related hospital, prescription drug and Medicare cost-sharing costs.

¨ States must establish "hardship" criteria to exempt persons in certain situations (prescribed by the state) from recovery efforts.

¨ States may expand recovery efforts to other Medicaid services.

¨ States may place liens on real property of Medicaid long-term care recipients not expected to return home (within certain parameters).

¨ When a spouse or dependent child remains in the home after the beneficiary dies, states may seek judgments to collect Medicaid costs when the house is sold or from the estate once the spouse or dependent child dies.

While states must meet minimum federal requirements, they have considerable latitude with regard to implementing policies that go beyond minimum federal requirements, within certain limits.

Currently, North Carolina’s Transfer of Asset and Estate Recovery policies meet, but do not exceed, minimum federal requirements.

The Purpose of This Report Is to:

1) Assess nationwide trends regarding state policies governing the scope and administration of Transfer of Asset and Estate Recovery policies.

2) Identify common policy trends among states having the best collection rates.

3) Determine how North Carolina compares with nationwide trends pertaining to Medicaid recovery efforts.

4) Assess implications of national trends for North Carolina and potential ramifications of various policy changes that might be considered.

 Key Items to Be Examined:

¨ Identification of states with the highest percentage of recovery collections as a percent of total Medicaid spending and any common policy trends

¨ Identification of states with the lowest percentage of recovery collections as a percent of total Medicaid spending and any common policy trends

¨ Prevalence of current use of TEFRA (pre-death) liens placed on real property of Medicaid long-term care recipients not expected to return home

¨ Prevalence of states that exceed minimum federal requirements regarding Transfer of Asset and Estate Recovery policies

¨ Use of private contractors for recovery collections and associated impact

¨ States considering/implementing further efforts to tighten identified loopholes to:

· increase private payment for care (through either changes to state Transfer of Asset or Estate Recovery policies)

· address inequities that result in incentives or disincentives for seeking institutional long-term care as opposed to home/community care

¨ Prevalence of use of "undue hardship" criteria

¨ Recovery efforts in situations where a surviving spouse/eligible dependent remains in the home of the deceased Medicaid long-term care recipient

¨ How states define "estate" -- (i.e. more broadly than probate definition?)

In spite of the federal mandate, Alaska, Georgia, Texas, and Michigan indicated that they do not yet have an operational estate recovery program.

The Long-Term Care Policy Office, with the assistance of staff in the Recipient and Providers Services Section of the Division of Medical Assistance, developed a survey to collect information from all 50 states regarding the items outlined above. The survey was conducted in July and August of 1998. As necessary, follow-up contacts were made with states in an attempt to clarify their responses or solicit missing information. Some states indicated that information for some survey items was not readily available. Based on the responses provided by states, survey data for key items was then compiled and analyzed. The Division of Medical Assistance reviewed the findings compiled by the Long-Term Care Policy Office to help ensure the accurate interpretation of the responses as well as the accuracy of terminology and descriptions used in this report.

48 states responded, at least in part, to the survey. No information was received from the states of Virginia or Oklahoma.

Overall Recovery Collection Information:

1.) As a percent of total Medicaid expenditures reported, state recovery collections for 1997 ranged from a low of less than one-one hundredth of one percent to a high of .83%. ( NC’s percentage was .01%)

¨ based on findings from this survey compared with 1994 data, (published in a 1996 report on Medicaid recovery efforts among states by the AARP Public Policy Institute), collection rates as a percentage of total Medicaid spending have increased somewhat (at least among states for which prior data was available).

This earlier AARP report showed:

· Oregon had the highest percentage of collections versus total Medicaid expenditures (.54%) based on 24 states reporting.

· California had the highest dollar volume of collections ($28 million or .19%)

 2.) The national average collection percentage, based on states reporting information for this item was .26%.

· It is important to note that collection amounts reported are inclusive of both estate recoveries as well as collections from liens (for states that use liens). (See Attachment #1 for state-by-state summary of above items.)

 Overall Recovery Policy Findings

1.) 48% (21) of states responding (44) indicated that they applied Estate Recovery policies to services beyond those required by federal law. (NC does not apply policies to services beyond those required.)

· Of these 21 states, 15 apply Estate Recovery policies to all Medicaid services provided. (See Attachment #2 for a state-by-state summary.)

 2.) 28% (13) of states responding (46) indicated that they applied Transfer of Asset policies to individuals receiving services in addition to the services required by federal law. (NC is not one of these states.) (See Attachment #2 for a state-by-state summary.)

3.) 91% (40) of states responding (44) have established "undue hardship" criteria to exempt certain beneficiaries from recovery collection efforts. (NC has such criteria)

· Ohio, New Hampshire, and Connecticut are all working on developing undue hardship criteria.

· In Minnesota, counties determine undue hardship on a case-by-case basis within allowable federal parameters. (See Attachment #3 for a state-by-state summary.)

4.) 35% (16) of the states responding (46) indicated they are using or will implement in near future TEFRA (pre-death) liens as a way to increase potential repayment of Medicaid expenditures. (NC does not use TEFRA liens) (See Attachment #2 for a state-by-state summary.)

5.) 33% (14) of states responding (43) indicate that they seek to recover assets beyond those limited to the state’s probate definition of estate. (NC is not one of these states) (See Attachment #4 for a state-by-state summary and descriptions of other types of recoverable assets pursued.)

6.) 35% (16) of states have established thresholds for which recovery is not pursued when the estate value is less than the threshold level. (NC has a $5,000 threshold on estate values for pursuing recovery.)

· Another 5 states indicate that they consider the cost/benefit of recovery efforts for small estates. (See Attachment #4 for a state-by-state summary)

 7.) 32% (14) of states indicate they do not seek recovery for claim amounts below certain state established levels. (NC does not pursue claims less than $3,000.)

· Another 4 states report that they consider the cost/benefit of seeking recovery depending upon the claim amount. (See Attachment #4 for a state-by-state summary.)

 8.) In cases where a spouse or a minor/disabled adult child is living in the home after the Medicaid beneficiary dies: (some use more than 1 approach)

· 84% (37) of states responding (44) indicate they can waive recovery

· 27% (12) of states responding (44) indicate they can defer recovery

· 34% (15) of states responding (44) indicate they can negotiate recovery ( See Attachment #2 for a state-by-state summary.)

Collection Method Findings

¨ 19% (8) of states responding (42) contract out all or a portion of their recovery collections to private entities. (NC does not contract out recovery efforts.)

· collection rates for these states, as a percent of total Medicaid spending, is not significantly different from average collection rates overall (.27% compared with .26% overall)

· fees charged by contractors range from 10% to 19.4% of collections (averages 14.5%) (See Attachment #3 for state-by-state summary.)

States with the Highest and Lowest Collection Rates as a Percent of Total Medicaid Spending

¨ The 10 states with the highest collections as a percent of total Medicaid

spending (‘97) are:

1. Minnesota * (.83%)

2. New Hampshire (.78%)

3. Connecticut (.74%)

4. Oregon (.74%)

5. Idaho (.54%)

6. Wisconsin (.52%)

7. Iowa (.52%)

8. North Dakota (.49%)

9. Maine (.45%)

10. Massachusetts (.39%)

* Note: Collections reported for MN for 1997 included some recoveries made in 1996 which could not be extracted from the total reported. As such, their percentage of collections and possibly also their rank order may be skewed.

¨ Average collections as a percent of total Medicaid spending for these states is 0.60% compared to 0.26% overall.

¨ It is also worth noting that, consistent with the findings published in 1996 by the AARP Public Policy Office, California continues to have the highest collections in terms of total dollars collected.

· Collections reported for 1997 totaled $32.5 million or 0.20% of total Medicaid spending. (Also has highest reported expenditures) 

Common Policy Trends among Top 10 Collection States:

1.) More of these states (60%) apply Estate Recovery policies to services in addition to those mandated by federal law (compares to 48% overall).

2.) More of these states (50%) use TEFRA liens (compares to 35% overall).

3.) Slightly more of these states apply transfer of asset penalties to services in addition to those federally mandated (30% compared to 28% overall).

4.) Similar to overall findings, the vast majority of these states do not contract out collections to private companies (estate and/or liens). (80% vs. 81% overall)

States with the Lowest Collection Rates

¨ The 10 states with the lowest collections as a percent of total Medicaid spending (‘97) are:

1. Louisiana (<0.01%)

2. Alabama (<0.01%)

3. Tennessee (<0.01%)

4. Hawaii ( 0.01%)

5. North Carolina ( 0.01%)

6. Delaware ( 0.02%)

7. Arkansas ( 0.02%)

8. Mississippi ( 0.03%)

9. Ohio (0.04%)

10. New Jersey (0.05%)

Note: These states average collections of .03 % as a percentage of total Medicaid spending (compares with .26% overall).   

 State recovery collections as a percent of total Medicaid expenditures ranged from less than .01% to a high of .83%.

Total Medicaid expenditures for all states reporting was $87.6 billion with collections totaling $209.4 million.

While not included in the 16 states using TEFRA liens, Wyoming & Nevada both have state authority to use these liens but are not doing so.

The State of Washington reports that they require long-term care facilities to remit all funds remaining in the personal account of a deceased Medicaid covered resident.

About a third of states responding had, or were considering, actions to strengthen recovery efforts through better enforcement of existing policies and/or through policy changes.

About a third of states responding reported that recovery efforts go beyond the state’s definition of the "probate estate."

About a third of states responding have established an estate value below which no recovery is sought. About a third of states also reported having claim levels below which no recovery is sought.

Eight states reported using private contractors for estate and/or lien recovery efforts. When considering collections as a percentage of total Medicaid spending, average collection rates among states that contract were almost identical to states that do not contract out this function.

Collections as a percent of total Medicaid spending among the top ten collecting states ranged from .39% to .83%- with an average rate of .60% compared to .26% overall.

Consistent with the 1996 AARP report, California had the highest dollar volume of recovery collections $32.5 million or .20% of total Medicaid spending.

States with higher collection rates are more likely to seek recovery for, and apply Transfer of Asset policies to, services in addition to those required by federal law. They are also more likely to use TEFRA liens and not to limit recovery efforts to the state’s probate definition of estate.

Although North Carolina is in the bottom 10 collecting states, recoveries have increased by 200% between 1996 and 1997 from about $279,000 to more than $840,000. It is likely that our low Medicaid eligibility level impacts beneficiary estate values and subsequently, the likelihood of there being significant recoverable assets. Another factor likely to impact collections is the ability of beneficiaries to convert real property to income producing property which can then be transferred without penalty.

Survey Findings - Continued

Common Policy Trends among Lowest Collecting States:

1.) Fewer (30%) of these states apply estate recovery policies to additional services beyond those required by federal law (compares to 48% overall).

 2.) 30% of these states apply Transfer of Asset policies to services in addition to those required by federal law (same percentage overall).

 3.) Fewer (20%) of these states use TEFRA liens (compares to 34% overall).

 4.) More of these states (80%) limit recovery efforts to their state’s probate definition of estate (compares with 67% overall).

Compared to other states, states having the lowest collections as a percent of total Medicaid spending are less likely to apply Estate Recovery and/or Transfer of Asset policies to services that go beyond those required by federal law. These states are also less likely to pursue assets that go beyond the state’s definition of "probate estate."

North Carolina has flexibility to exercise options with regard to recovery collection policies. Some key policy changes that could be considered include:

1.) Applying Estate Recovery policies to additional services.

· Estate Recovery efforts could be applied to additional long-term care related services such as Personal Care Services (regardless of setting), home health care, private duty nursing, etc. or encompass all Medicaid state plan services provided to Medicaid beneficiaries 55 and older.

2.) Applying Transfer of Asset sanctions to persons seeking services in addition to those required by federal law.

· could be applied to same long-term care related services listed above

3.) Placing TEFRA (pre-death) and/or post death liens on real property owned by Medicaid beneficiaries to whom recovery efforts apply to ensure that the property is not transferred or sold without the state having the opportunity seek repayment of Medicaid costs from any property equity that has accumulated.

4.) Applying Transfer of Asset sanctions to income producing property.

· This would help stem the tide of persons who convert real property to income producing property to become Medicaid eligible and then subsequently transfer the property without penalty-- eliminating the opportunity for the state to recoup all, or a portion of Medicaid costs from the equity that exists in the property which was transferred.

5.) Broadening the definition of "estate" for recovery collection purposes.

· Federal law allows additional types of assets to be recovered.

Conclusion

This report identifies several options allowable under federal law and/or regulation that North Carolina could pursue. Some states have adopted one or more of these options in an effort to enhance their recovery efforts and reduce the likelihood of persons transferring their assets in order to access Medicaid covered long-term care services and/or to avoid repayment of long-term care costs incurred by Medicaid. North Carolina policymakers should give consideration to enacting these options.