3.11.2010

Dear Chairman and members of the Committee. My name is Bill Felkner, I am the president of the Ocean State Policy Research Institute. At OPSRI, we do not support nor oppose legislation. Senator Bates invited us to present information from a recent study that we did on the Global Medicaid Waiver, focusing on the information in the report related to asset recovery, which is being discussed in relation to Article 18 in the Governor's Supplemental Budget. We sincerely appreciate Senator Bates' invitation and would like to point out that this invitation does not indicate his position on the Article. 

Our report has a simple message: Get the middle class and wealthy off welfare-and Medicaid is welfare, tax funded medical care. Article 18, which would empower the Department of Human Services to increase asset recovery efficacy, is a way to start that process of getting the those who are not poor off Medicaid. 

Why are the middle class and affluent on welfare? Because of lax eligibility standards, loopholes and creative attorneys, and ineffective asset recovery. 

Many of the recommendations we present in our study are current federal law, and using those tools is also a good start. But the recommendations made in Article 18 (previously presented by Deborah Buffi, Esq., Associate Director, Executive Office of Health and Human Services, or EOHHS) will bring millions of non-tax revenues to the state and more importantly, change the psyche and culture in Rhode Island, and indeed the nation. 

The elderly are 10% of the Medicaid population; yet consume 25% of the costs. 

Thirty percent of the Medicaid population (elderly, adults with disabilities, children needing services) consumes 79% of the spending. 

Most of the information I will present will focus on just elderly care, but I have recently learned that some of those individuals with disabilities (non-elderly) have trust accounts that do not impact Medicaid eligibility, and more than one of these trusts are in the millions of dollars. Yet they continue to use the taxpayer to pay for their Medicaid services, and when the individual dies the trust gets passed to the survivors.

The population of those aged 85 and older, those most likely to need Long Term Care (LTC), will increase by 46% from 2007 to 2030. 

However, only 1% to 5% of eligible consumers plan ahead and purchase LTC insurance. 

We know that 91% to 99% of eligible consumers are not "poor" but this lack of planning will most likely cause them to go on Medicaid. Ask yourself, and your neighbor, "Do you have LTC insurance?" If they say no, then ask them why they are expecting you and your children to pay for their healthcare when they become elderly. 

Nationally, 80% of seniors own their own home, 70% of them own it free and clear. However, state staff told us that only 12.7% of the caseload still own homes. Most likely, these assets are being transferred out of ownership, passed to offspring, with the expectation that "government" will pay for their long-term care. "Government" really means their neighbors' taxes. 

The EOHHS testified that if the measures proposed in Article 18 were approved, the state would see an additional $1.3 million in non-tax revenues by using tools that would capture some of these assets. I believe this number is misleading, but not necessarily incorrect. We could not expect the system to be fully functional overnight. But if it were, our research shows that just by using existing tools, with the necessary resources, the state could have recovered $15 million last year - $13 million more than it did. 

But, more importantly, effective asset recovery sends a message that the wealthy and affluent should not expect their neighbors to pay for other people's long-term care. I want to share with you a true story about a friend of mine who happens to work at DHS. His father did not plan for his long-term care, and perhaps was an "old school" type that would not go on tax-funded healthcare because he didn't go on Medicaid and his LTC expenses eventually depleted all of his accumulated wealth. The first thing my friend did was purchase long-term care insurance. 

For too long, people have not understood that if they do not plan for their healthcare needs when they become elderly, they will either lose everything they have saved, or they will be forced to go on tax-funded Medicaid. Because so many people have chosen option B (see the disappearing home equity mentioned above) that we are now faced with a Medicaid program that consumes nearly one quarter of our budget (23% in 2007). 

We have made several recommendations and outlined a plan starting on page 25 of the report. But the first thing we need to agree on is that getting the wealthy and middle class off welfare is a good starting point.

Thank you for allowing me to speak.