Testimony to Michigan House Subcommittee
Testimony presented to the Department of Community Health Subcommittee
of the House Appropriations Committee
by John B. Payne, on behalf of the
Elder Law and Disability Rights Section of the State Bar of Michigan
February 27, 2007
Thank you for the opportunity to provide testimony. My colleague, Dolores Coulter, has introduced the Elder Law and Disability Rights Section, which we represent.
I have been intimately involved with the Medicaid program since 1975, first as a Medicaid worker and supervisor; then, since 1988, representing individuals seeking benefits. I also have a practice in Pennsylvania, which has had estate recovery since the mid-1990s. I hope, in these few minutes, to explain why estate recovery is a burden that is unfairly borne by the lowest economic strata of our society and why it results in some tragic miscarriages of fairness and policy.
To put this in context, I would like to supplement my testimony with a paper I wrote last spring to explain why Medicaid planning—i.e. the gentrification of long-term care Medicaid—is not a major cause of the growth of Medicaid spending. The words are mine, but they are based on economic data provided by the U.S. government. Taking into consideration that Medicaid patients in nursing homes really are economically marginalized, it becomes clear why estate recovery is an unfair burden that deprives poor individuals of the opportunity to pass on a pittance to families who are living on the edge of poverty and to reward family members who have given up jobs and spent years caring for them.
Wealthy middle-class families are not sheltering large sums of money in abusive financial arrangements, nor are they bankrupting the program. The evidence cited to prove that middle-class nursing home patients are gaming the system is that the majority of nursing home residents are receiving Medicaid, despite the fact that only 20% of Americans are in poverty. The logic is this: If 20% of Americans are poor, but 70% of nursing home residents are on Medicaid, then 50% of those receiving Medicaid in nursing homes are not poor and must have sheltered their wealth. While this seems logical, it is not consistent with two basic principles of American wealth and long-term care utilization. The first is that poverty is much more pervasive than most people realize. Furthermore, the greater a disabled elderly person’s income and assets, the less likely the person will enter a nursing home.
The average net worth of American families was three or more times the median and net worth is lower in higher age brackets. Furthermore, in all age groups, non-Hispanic White median and mean net worth, both, were three to five times as high as they were for non-White and Hispanic households.
The median value is the middle value. As many families have a net worth below the median as above it. The mean, however, is the average net worth. The fact that the mean is so much higher than the median indicates that there is a tremendous concentration of wealth among a few very wealthy families. It also means that the numbers of families in lower net worth strata are much greater than in higher strata.
The second reason for a disproportionate population of Medicaid-eligible nursing home residents is that disabled individuals with more resources will be less likely to enter a nursing home. There were more than twice as many community residents with long-term care needs as nursing home residents.
Between 1994 and 1999, the number of spouses and children providing care to an older person with disabilities increased, while the use of formal care by older persons with disabilities who received care in the community declined. Reliance on family care increased dramatically and it may be presumed that the trend has continued. A larger proportion of caregivers were caring for persons with higher levels of disability in 1999 than in 1994, and caregivers and care recipients were older than in 1994, with nearly 40% of caregiving children assisting parents age 85 or older in 1999 and almost 13% of caregiving children age 65 or older.
In 1999, about 30% of children with a parent in a community residential care setting, such as assisted living, were providing care. Family caregivers provide the vast majority of the long-term care received by older persons with disabilities.
Contrary to the perception of many legislators and welfare officials, elderly people are not trying to get into nursing homes to take advantage of Medicaid; they are desperately trying to remain in the community. The nursing home is literally the last resort.
Given that nursing home patients on Medicaid really are poverty cases, the homestead is generally all that will be recovered by estate recovery. Furthermore, we are not talking about luxury homes. The nursing home patients whose families come to me are nearly always in their mid to late 80s. The home is generally a bungalow or small ranch that was purchased in the ‘40s or ‘50s and has not been updated. This is not a huge reservoir of wealth that the state can tap into.
Furthermore, most middle-class people will be able to avoid estate recovery if they consult a lawyer. That has been my observation in Pennsylvania. Only the poorest and least sophisticated people will end up losing their homes to estate recovery.
Estate recovery results in tragic injustice in some cases. Medicaid allows the transfer of a home to an adult son or daughter who provided care for a person going into a nursing home for two years. However, it is not uncommon in Pennsylvania for a person die in a nursing home on Medicaid without having transferred the home to the caregiver child. If that happens, there is no remedy. The home will be lost to the Medicaid claim, simply becausethe family was unaware that the title would need to be transferred before death.
Estate recovery only burdens the poorest and most unfortunate of Michigan’s citizens. It is furthermore not cost-effective. It will yield a pittance, at best, while requiring significant start-up and administrative costs. I urge you to consider whether such a program is sound public policy.
John B. Payne, Council Member
Elder Law and Disability Rights Section
1800 Grindley Park Street, Suite 6
Dearborn, Michigan 48124
313.563.4900 FAX 313.583.3100