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F I S C A L I M P A C T R E P O R T

SPONSOR Leavell

ORIGINAL DATE

LAST UPDATED

1/27/06

HB

SHORT TITLE Impact of Facility-Based Care on Medicaid

SB SM 9

ANALYST Lewis

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI*

(Parenthesis ( ) Indicate Expenditure Decreases)

*See narrative.

Duplicates HM 4

SOURCES OF INFORMATION

LFC Files

Responses Received From

Aging and Long-Term Services Department (ALTSD)

Human Services Department (HSD)

Health Policy Commission (HPC)

SUMMARY

Synopsis of Bill

Senate Memorial 9 requests that the Aging and Long-Term Services Department conduct a

study, in cooperation with the Human Services Department and the appropriate statewide

organizations representing aging and long-term services, on the financial impact of facility-based

and home- and community-based long-term care on the Medicaid budget and identify alternative

models of financing long-term care.

The memorial further requests that:

the study identify appropriate incentives to encourage self-care and the use of insurance, ex-

plore potential ways to limit asset identification and asset transfer and promote maximum

Medicaid estate recovery;

the Aging and Long-Term Services Department support the efforts of a statewide organiza-

tion representing the needs of people with Alzheimer's disease, and other organizations as

appropriate, to hold a conference exploring alternative models of financing long-term care

services;

Senate Memorial 9 – Page

2

the Aging and Long-Term Services Department develop recommendations on implementa-

tion of alternative mechanisms of financing long-term care services and report the findings

and recommendations to the Legislative Health and Human Services Committee in October

2006; and

copies of the memorial be transmitted to the Secretaries of Aging and Long-Term Services

and Human Services.

FISCAL IMPLICATIONS

No funds are appropriated to pay for the study. According to the Aging and Long-Term Services

Department (ALTSD), there would be minimal fiscal impact to pay for travel and per diem for

committee members as well as the cost of putting on a conference. ALTSD believes it can absorb

these additional costs.

However,

Human Services Department (HSD) argues that HSD reimburses ALTSD for adminis-

trative costs relating to Medicaid long-term care, so that the HSD budget will be impacted in

terms of staff time and administrative costs for both departments. HSD estimates that the impact

on staffing would be the addition of one-half (0.50) full time equivalent (FTE) for program re-

sponsibilities (at 50% federal match), with additional staffing impact on ALTSD. Without pro-

viding any breakdown of costs, HSD estimates the total cost of the study at $500,000.

SIGNIFICANT ISSUES

Citing a Kaiser Foundation report titled “Long-Term Care: Understanding Medicaid’s Role for

the Elderly and Disabled” (November 2005), the Health Policy Commission (HPC) notes that

Medicaid is the single largest source of financing for long-term care. With payments of $86.3

billion in 2003, Medicaid accounted for nearly half of the nation’s spending on long-term care

services.

Noting that the number of Americans age 85 and above is projected to double by 2030 and to

quadruple by 2050, the report predicts increasing demand for nursing home and other long-term

care services. This increasing demand, combined with trends toward smaller families, higher di-

vorce rates and higher costs for care giving will result in increased pressure on the public pro-

grams that currently finance long-term care.

ALTSD worked with other entities and individuals on a preliminary study of “Alternatives to

Medicaid Financing for Long-Term Care 2005” that was reported to the Legislative Health and

Human Services Committee (LHHS) in November 2005. ALTSD notes that several options have

gained prominence nationally as viable methods for alternative financing for long-term care, in-

cluding long-term care insurance, state “partnerships” for long-term care insurance, annuities,

life insurance with long-term care provisions, long-term care insurance offered through employ-

ment or unions, and reverse mortgages.

HSD counters that the target audiences for these insurance products are the middle and upper

middle-income groups, and that these individuals are already using Medicaid trusts and other

mechanisms to legally shelter their income and assets so they can qualify for Medicaid. Accord-

ing to HSD, Congress has begun to analyze the programs and structures that allow upper income

individuals to obtain public benefits that were originally intended for poor and low-income indi-

viduals and families.

Senate Memorial 9 – Page

3

According to HSD, the preliminary study noted above by ALTSD was the product of an ad hoc

task force initiated by individuals from the public and private sectors to pursue the issues in a

memorial, SM 35, that was introduced but not enacted in 2005. HSD representatives attended the

task force meetings as observers only. HSD describes this memorial as an attempt by members of

that ad hoc task force to formalize its recommendations.

As the single state Medicaid agency, HSD notes that it is cognizant of the cost of long-term care

and continues to work on initiatives to lower Medicaid’s long-term care costs. However, HSD

questions whether the single state Medicaid agency should be involved in promoting private

long-term care insurance, partnership policies, annuities, reverse home mortgages, and tax breaks

for those who can afford to purchase these products.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

According to HSD, individuals interested in pursuing the items delineated in the memorial would

work with the private insurance industry for availability and/or purchase of those items. Indi-

viduals who qualify for Medicaid would continue to access Social Security Title XIX Medicaid

benefits.

ML/nt