Academic journal article Missouri Law Review

Financing Long-Term Care in Missouri: Limits and Changes in the Wake of the Deficit Reduction Act of 2005

Academic journal article Missouri Law Review

Financing Long-Term Care in Missouri: Limits and Changes in the Wake of the Deficit Reduction Act of 2005

Article excerpt

I. INTRODUCTION

The expense of long-term care, intensified by an aging population, has contributed to a nationwide financial strain on the Medicaid program, complicating the already difficult tasks of medical and fiscal planning for the elderly. Missouri's elderly population is substantial, the state having ranked 14th in the country for the number of residents over age 65 in 2000. (1) These senior citizens face the prospect of paying for long-term care, and many of them will rely on Medicaid for all or part of the cost. Medicaid is the primary taxpayer-funded program that finances long-term care. Current projections suggest that the cost of Medicaid "will continue to increase exponentially." (2) As a result of this projected increase, both the federal government and the state of Missouri have enacted legislation restricting the availability of Medicaid benefits for long-term care--limits that affect the financial planning of the baby boom generation, especially those in the middle-class.

Title XIX of the Social Security Act establishes the Medicaid program and provides federal funding to help states pay for medical assistance to individuals who cannot otherwise afford it. (3) States also provide funding for the program and must implement it within federal guidelines. (4) Since its creation in 1965, Medicaid has been modified several times by Congress, most recently with the Deficit Reduction Act of 2005 (DRA). (5) The Congressional Budget Office estimates that reductions in Medicaid outlays under the DRA would, while increasing direct spending by $2.2 billion in 2006, ultimately diminish direct spending by $4.7 billion from 2006-2010. (6) Many of the cutbacks in spending will impact elderly people seeking Medicaid coverage for long-term care. The cutbacks result from provisions that discourage asset transfers, limit the usefulness of annuities in sheltering assets, and include home equity as a countable asset when determining Medicaid eligibility. (7)

In response to changes in federal law, Missouri immediately implemented the DRA as set forth in Section 208.010.7 of the Missouri Revised Statutes (8) and enacted the Missouri Continuing Health Improvement Act of 2007 (MCHIA). (9) Both Acts limit access to "Vendor Medicaid," (10) while ostensibly providing for alternative payment options, thwarting previous methods used by some middle-class Missourians to shelter their assets from long-term care costs. This summary examines provisions of the DRA and MCHIA that will most strongly impact elderly Missourians and addresses the considerations necessary for attorneys as they help clients plan for long-term care.

II. LEGAL BACKGROUND

A. Federal Medicaid under the Social Security Act

Title XIX gives states with approved Medicaid plans a right to "federal matching funds at a specified rate for all allowable expenditures." (11) Predictably, the incentives provided by federal funding influence state Medicaid programs and the Medicaid planning options available under them. Of these combined state and federal Medicaid funds, a large portion is spent on long-term care for the elderly. Long-term care includes medical and personal assistance provided to individuals with chronic illnesses or disabilities, among them residents of long-term care facilities. (12) In 2005, 34% of Medicaid spending was on long-term care services, (13) due in part to the opportunities for Medicaid planning available under existing laws. Planning tactics relating to asset transfers, look-back periods, and other methods such as annuities permitted the elderly to shelter assets from Medicaid eligibility requirements.

Prior to the enactment of the DRA on February 8, 2006, restrictions on asset transfers were relatively broad. These restrictions allowed for reasonably straightforward Medicaid planning, mainly because the date that the penalty period began to run was the date of asset transfer. …

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