“Improving the System of Financing Long-Term Services and Supports for Older Americans” Working Paper Discussion by Mark J. Warshawsky, Ph.D. Senior Research Fellow, Mercatus Center Long Term Care Discussion Group February 22, 2017 AHIP, Washington, D.C.

Agenda Follow-up to 2013 Federal LTC Commission Literature Review Estate Medicaid Recovery Efforts by State State Rules on Countability of Retirement Assets Asset Holdings by Elderly Households Policy Recommendations

Follow-up to 2013 Federal LTC Commission CLASS Unsustainable (Warshawsky (2009)) Commission Concerns Unmet Needs Modest (LaPlante, et al. (2004)) Medicaid LTSS Financing Increasingly Burdened Declining Availability of Uncompensated Family Caregivers Medicaid is Poorly Designed Insurance; Crowds Out Insurance (Brown and Finkelstein (2007,2008)) Compressed Timetable Precluded Investigation of Key Issues

Literature Review De Nardi, French, Jones (2013) GAO (2012) Greenhalgh-Stanley (2012)

Medicaid Estate Recovery Efforts by States Found Data, 2002-2011 Georgia, Michigan, Texas, New Mexico, Washington, D.C., Very Weak Efforts Efforts Relative to Estimated Net Worth Efforts Relative to Spending Efforts Relative to Best Efforts

LTSS Medicaid Estate Recovery Amounts as a Percentage of Estimated Net Worth of Senior Medicaid Beneficiaries, 2003–2011

Medicaid Estate Recovery Amounts as a Percentage of LTSS Expenditures, US Aggregates, 2002–2011

Actual and Potential Estate Recovery Amounts Assuming Replication of Highest State Recovery Rates, 2002–2011

State Rules on Countability of Retirement Assets Wide Variability – Nine Categories Countable or Not Spouses Included or Not Type of Retirement Accounts Dollar Limits Accessed or Not Distributed or Not Countable, US Average, 71% Most States Exempt at Least Some Retirement Assets

Percentage of Retirement Assets Deemed Countable toward Medicaid Asset Limit in 2011, by State and Rules Grouping Table 3

Asset Holdings by Elderly Households Housing is Widespread (80%) Housing is a Liquid Asset, Median Net Value is $100,000 Most Have Retirement Assets (52%), Median Value is $90,000 Median Net Worth is $213,000 At 40% Percentile, Net Worth was $88,000 Retirement and Housing are Widespread Across Income Groups Some Poor Households Have Considerable Housing Assets

Distribution of Non-annuity Wealth Components for Households Age 65–67, 2012 Table 6

Select Retirement Resources for All Retired Households Age 65–67, by Income Quintile Table 7

Percentiles of Primary Housing Assets by Potentially Annuitizable Wealth Deciles, Retired Households Age 65–67

Policy Recommendations All Retirement Assets Countable Electronic Verification of Assets; Five-Year Look-back Housing Asset Exclusion at $100,000 State Recovery Efforts – Minimum Set at 1%, Increasing to 2%, Enforced by Penalty Liens Mandatory

Bridging the gap between academic ideas and real-world problems