What to Look for When Buying an Annuity

October 15, 2019

An annuity can be a useful tool for long-term care  planning, but annuities are also complex financial products that are hard to understand. If purchasing an annuity, you need to consider your options carefully.

An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life, or for a certain term. Annuities come in many flavors. They can be deferred (begin paying out at a later date) or immediate (begin paying out right away). They can pay a fixed amount each month or pay out a variable amount based on how the money is invested. While a fixed immediate annuity can be a good Medicaid planning option for a married couple, other annuity products can be quite complex and confusing and are not right for everyone.

If you have decided an annuity is the right choice for your long-term care or retirement plan, you need to shop around to find the right product. The following are some purchasing tips:

    • Check the terms. Be sure to read the annuity contract carefully. Annuities often have surrender charges that penalize you for withdrawing your money too early. You need to understand for how long you won’t be able to access your money and when payouts begin. There may also be other fees associated with the annuity as well as optional riders. Understanding the fees will allow you to shop around to find the best product.
    • Choose your salesperson. Insurance companies often pay generous commissions to the brokers who sell their particular annuities, payments that many of the brokers don’t disclose. They also generally don’t disclose whether they are paid more or less by one insurance company than another or whether the annuity being sold is the best option for the consumer. Ask your broker questions to determine how they are paid. You may want to seek a second opinion to make sure your salesperson isn’t steering you into a product that isn’t right for you.
    • Select a sound insurance company. Annuity payments are often supposed to last a lifetime, so you want an insurance company that will stick around. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moody’s, Standard & Poor’s, or Weiss.

Tips for Preventing, Detecting, and Reporting Financial Abuse of the Elderly

October 15, 2019

Reports of elder financial abuse continue to  increase, and the elderly are particularly vulnerable to scams or to financial abuse by family members in need of money.

It is hard to ascertain the exact numbers of people affected by elder abuse because studies show that elder abuse is underreported. However, one study found that financial loss from financial elder abuse could be close to $3 billion a year.

While it is impossible to guarantee that an elderly loved one is not the victim of financial abuse, there are some steps you can take to reduce the chances. One option is to have more than one family member involved in caring for the loved one. You can also encourage the elder to get involved in community activities to ensure that he or she has a wide range of support. Using direct deposit as much as possible is also helpful. And of course you should always screen caregivers carefully and verify references.

Financial abuse can be very difficult to detect. The following are some signs that a loved one may be the victim of this kind of abuse:

  • The disappearance of valuable objects
  • Withdrawals of large amounts of money, checks made out to cash, or low bank balances
  • A new “best friend” and isolation from other friends and family
  • Large credit card transactions
  • Signatures on checks that look different
  • A name added to a bank account or newly formed joint accounts
  • Indications of fear of caregivers

If you suspect someone of being financially abused, there are several actions you can take:

  • Report the possible crime by calling your local Adult Protective Services and state attorney general’s office. File a police report.
  • Explore options at your local probate court if your state has such courts. The court can intervene if someone in the family is misusing a power of attorney or their role as guardian or conservator.
  • Contact advocacy organizations. The National Center on Elder Abuse offers guidance on how to investigate and seek justice for elder abuse. State laws vary, but some have elder abuse statutes and may be able to get restitution for breach of fiduciary duties.
  • Try to get a temporary restraining order from a court while building your case.

Another valuable resource is Aging in Place’s guide to recognizing elder abuse.

Most Are Taking Social Security at the Wrong Time

October 15, 2019

A new report finds that almost no retirees are  making financially optimal decisions about when to take Social Security and are losing out on more than $100,000 per household in the process. The average Social Security recipient would receive 9 percent more income in retirement if they made the financially optimal decision.

When claiming Social Security, you have three options: You may begin taking benefits between age 62 and your full retirement age, you can wait until your full retirement age, or you can delay benefits and take them anytime up until you reach age 70. If you take Social Security between age 62 and your full retirement age, your benefits will be reduced to account for the longer period you will be paid. If you delay taking retirement, depending on when you were born, your eventual benefit will increase by 6 to 8 percent for every year that you delay, in addition to any cost-of-living increases.

The new report, conducted by United Income, an online investment management and financial planning firm, found that only 4 percent of retirees make the financially optimal decision about when to claim Social Security. Nearly all of the retirees not optimizing their benefits are claiming benefits too early. The study found that 57 percent of retirees would build more wealth if they waited to claim until age 70. However, currently more than 70 percent of retirees claim benefits before their full retirement age. Claiming before full retirement is the financially best option for only 6.5 percent of retirees, according to United Income.

The consequences of claiming Social Security too early can be big. The report found that collecting benefits at the wrong time causes retirees to collectively lose $3.4 trillion in potential income (an average of $111,000 per household). The report also estimates that elderly poverty could be cut in half if retirees claimed benefits at the financially optimal time.

One reason most people do not optimize Social Security is because waiting to collect benefits means their overall wealth may fall during their 60s and 70s. They also may not be aware that collecting benefits before full retirement age means that their benefits will be permanently reduced. According to the report’s authors, policy changes are necessary to get retirees to wait to claim benefits. The report recommends that early claiming be made the exception and reserved for those who have a demonstrable need to collect early. Another recommendation is to change the label on early retirement and call it the “minimum benefit age.”

To read the full report, click here.

For a CBS News article on the report, click here.

How to Use a Trust in Medicaid Planning

October 15, 2019

With careful Medicaid planning, you may be able
to  preserve some of your estate for your
children or other heirs while meeting Medicaid’s low asset limit.

The problem with transferring assets is that you have given them away. You no longer control them, and even a trusted child or other relative may lose them. A safer approach is to put them in an irrevocable trust. A trust is a legal entity under which one person — the “trustee” — holds legal title to property for the benefit of others — the “beneficiaries.” The trustee must follow the rules provided in the trust instrument. Whether trust assets are counted against Medicaid’s resource limits depends on the terms of the trust and who created it.

A “revocable” trust is one that may be changed or rescinded by the person who created it. Medicaid considers the principal of such trusts (that is, the funds that make up the trust) to be assets that are countable in determining Medicaid eligibility. Thus, revocable trusts are of no use in Medicaid planning.

Income-only trusts

An “irrevocable” trust is one that cannot be changed after it has been created. In most cases, this type of trust is drafted so that the income is payable to you (the person establishing the trust, called the “grantor”) for life, and the principal cannot be applied to benefit your or your spouse. At your death the principal is paid to your heirs. This way, the funds in the trust are protected and you can use the income for your living expenses. For Medicaid purposes, the principal in such trusts is not counted as a resource, provided the trustee cannot pay it to you or your spouse for either of your benefits. However, if you do move to a nursing home, the trust income will have to go to the nursing home.

You should be aware of the drawbacks to such an arrangement. It is very rigid, so you cannot gain access to the trust funds even if you need them for some other purpose. For this reason, you should always leave an ample cushion of ready funds outside the trust.

You may also choose to place property in a trust from which even payments of income to you or your spouse cannot be made. Instead, the trust may be set up for the benefit of your children, or others. These beneficiaries may, at their discretion, return the favor by using the property for your benefit if necessary. However, there is no legal requirement that they do so.

One advantage of these trusts is that if they contain property that has increased in value, such as real estate or stock, you (the grantor) can retain a “special testamentary power of appointment” so that the beneficiaries receive the property with a step-up in basis at your death. This will also prevent the need to file a gift tax return upon the funding of the trust.

Remember, funding an irrevocable trust within the five years prior to applying for Medicaid (the “look-back period”) may result in a period of ineligibility. The actual period of ineligibility depends on the amount transferred to the trust.

Testamentary trusts

Testamentary trusts are trusts created under a will. The Medicaid rules provide a special “safe harbor” for testamentary trusts created by a deceased spouse for the benefit of a surviving spouse. The assets of these trusts are treated as available to the Medicaid applicant only to the extent that the trustee has an obligation to pay for the applicant’s support. If payments are solely at the trustee’s discretion, they are considered unavailable.

Therefore, these testamentary trusts can provide an important mechanism for community spouses to leave funds for their surviving institutionalized husband or wife that can be used to pay for services that are not covered by Medicaid. These may include extra therapy, special equipment, evaluation by medical specialists or others, legal fees, visits by family members, or transfers to another nursing home if that became necessary. But remember that if you create a trust for yourself or your spouse during life (i.e., not a testamentary trust), the trust funds are considered available if the trustee has the ability to use them for you or your spouse.

Supplemental needs trusts

The Medicaid rules also have certain exceptions for transfers for the sole benefit of disabled people under age 65. Even after moving to a nursing home, if you have a child, other relative, or even a friend who is under age 65 and disabled, you can transfer assets into a trust for his or her benefit without incurring any period of ineligibility. If these trusts are properly structured, the funds in them will not be considered to belong to the beneficiary in determining his or her own Medicaid eligibility. The only drawback to supplemental needs trusts (also called “special needs trusts”) is that after the disabled individual dies, the state must be reimbursed for any Medicaid funds spent on behalf of the disabled person.

To find out whether a trust is the right Medicaid planning strategy for you, talk to your elder law attorney.

Ethical Issues in Representing a Client with Diminished Capacity

October 15, 2019

By Howard S. Krooks, Esq., CELA, CAP, Partner at Elder Law Associates PA
Attorneys often encounter working with clients who have declined physically and/or mentally, which is known in legal parlance as diminished capacity. However, the law assumes that every person has legal capacity unless and until a court has determined otherwise.

The American Bar Association Model Rules of Professional Conduct Rule 1.14 require an attorney when representing a client with diminished capacity to maintain a normal client-lawyer relationship as long as possible. The rules specify that in a “normal” client relationship, the attorney should be able to fully communicate with the client, the attorney should protect the client’s confidential communications and should allow the client to make core decisions about the representation.

Representing a client with diminished capacity puts the attorney into quite a predicament in procuring accurate information regarding the client’s legal problem. Generally, in order to maintain a normal lawyer-client relationship, the attorney must implement a three-stage interview process with the client to determine the legal problem in order to represent the client effectively. The process leads to one of four conclusions, from no evidence of diminished capacity to a lack of capacity and an inability to proceed with the representation.

While there is a difference between clinical capacity and legal capacity, there also are several different legal standards of diminished capacity, from Testamentary Capacity and Donative Capacity to Contractual Capacity. For example, a person may have the capacity to make decisions regarding certain simple things but lack capacity for other more complex matters.

Some believe it is inappropriate for attorneys to make capacity assessments. Yet, attorneys make capacity judgments daily, without formal training, including the initial determination of capacity as to whether clients can enter into the lawyer/client relationship. Throughout the representation, when signs present that capacity is questionable, the attorney must make deliberate efforts to assess capacity. Subsequent assessments of capacity beyond the initial assessment may be needed as capacity is fluid. The bottom line is that capacity assessments by lawyers are unavoidable.

When making an assessment, the attorney must always presume capacity. The attorney may seek guidance from an appropriate diagnostician in determining the extent of a client’s diminished capacity but should obtain client consent before any screening tests are performed. If a person is unable to consent, a legally authorized surrogate could make this decision. If necessary, an attorney can bring protective action if it’s reasonably believed that a client has diminished capacity and is at risk of substantial physical, financial or other harm, and in appropriate cases, seek the appointment of a guardian.

It’s something attorneys face all the time: working with clients who have declined physically and/or mentally. In the elder law world, this is known as diminished capacity. However, there is a big difference between the legal definition of diminished capacity and the clinical definition of diminished capacity.

Much of the clinical testing done on people to determine if diminished capacity exists deals with their inability to perform activities of daily living (ADL). For example, a doctor may test if the person can count backward from 20 to 1, if he or she can remember what year it is or who the president of the United States is, and test physical acuity, such as tying shoes, sitting/standing, walking, etc.

What attorneys need to be concerned with most though is their client’s executive function. Is the client able to make decisions regarding his or her legal matter and/or estate planning, financial future, living arrangements, welfare of their spouse/family, etc.? Consider this scenario: You’re meeting with a client to discuss case strategy and you notice he repeats himself two or three times in the same conversation, forgets what he had for lunch that day but still fully understands who you are, what you’re doing and what the conversation is about, and is fully capable of making decisions about his legal representation. Now, fast forward six months, and you’re having the exact same discussion with the client about changing the legal strategy, yet the client can’t understand what you’re talking about or make the same types of decisions. His decline is definitely noticeable, but he has not been declared legally incapacitated.

On the legal side, the law assumes that every person has legal capacity unless and until a court has determined that he or she lacks capacity. I can’t tell you how many people probably are lacking in capacity in the clinical sense and in the legal sense, but they don’t have guardians appointed for them simply because they haven’t been brought to court. In the eyes of the law, these people are still assumed or presumed to have capacity.

From the attorney’s perspective, you may very well be dealing with someone that has not been adjudicated to lack capacity, but that doesn’t mean they have it, just that it hasn’t been adjudicated. So, what can you do about it?

Rules Pertaining to Lawyers Representing Clients
with Diminished Capacity

The American Bar Association Model Rules of Professional Conduct Rule 1.14* requires an attorney when representing a client with diminished capacity to maintain a normal client-lawyer relationship as long and as far as reasonably possible. The rule recognizes that the attorney’s position is an “unavoidably difficult one.” It specifies that in a “normal” client relationship, the attorney should be able to fully communicate with the client, the attorney should protect the client’s confidential communications and should allow the client to make core decisions about the representation.

Through the “Duty of Communication,” the rule requires an attorney to explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. The rule recognizes that communications may be adjusted:

  • to the representation;
  • to the comprehension and needs of the client; and
  • even allowing for delaying transmission of information, if the delay is not to serve the lawyer’s own interest or convenience or the interests or convenience of another person.

“Confidentiality” is a core value of the client/lawyer relationship. All information relating to the representation is confidential, including any observations made by the attorney regarding a client’s capacity. Confidentiality remains vital even when the client has diminished capacity. An attorney must maintain client confidentiality even from concerned family members, unless the client has consented to disclosure or if there is a need for protective action (see below).

Representing a client with diminished capacity puts the attorney into quite a predicament in procuring accurate information from the client regarding the client’s legal problem. So, how does the attorney effectively determine the client’s objective and legal needs where the client has diminished capacity?

Generally, in order to maintain a normal lawyer-client relationship, the attorney must implement a three-stage interview process with the client to determine the legal problem in order to represent the client effectively.

The first step the attorney takes is Preliminary Problem Identification, where the lawyer asks the client open-ended questions. The attorney allows the client to relay the legal problem and the relief he or she seeks in a way that is most comfortable for the client.

Next, the lawyer conducts a Chronological Overview, where the lawyer asks the client to relay the legal problem in a systematic successive manner, beginning when the legal problem was first created to the present.

Finally, the attorney determines the possible causes of action or a planning strategy applicable to the client’s case in the Theory Development and Verification step.

The process of determining the legal problem in order to represent the client effectively leads to one of four conclusions:

  1. There is minimal to no evidence of diminished capacity, in which case the representation can proceed.
  2. There are some mild capacity concerns, but they are not substantial, in which case the representation can proceed.
  3. Capacity concerns are more than mild or substantial, and professional consultation or formal assessment of capacity may be merited. In this case, only if the client is determined to have capacity by a professional may the representation proceed.
  4. The capacity to proceed with the requested representation is lacking, in which case the representation may not proceed.

Legal Standards of Diminished Capacity

Earlier, I referred to the difference between clinical capacity and legal capacity. A further analysis is required with respect to legal capacity standards. According to the law, there are several legal standards of diminished capacity:

The first type of capacity is Testamentary Capacity. This means that at the time of executing a will, the testator (client) must have the capacity to know the natural objects of his/her bounty. In other words, the testator must understand the nature and extent of his/her property and interrelate those elements sufficiently to make a disposition of property according to a rational plan. This does not mean the testator must be capable of managing all of his or her affairs day to day. The testator also doesn’t have to have capacity consistently through time (i.e., the testator can sign his or her will at a lucid interval and lack capacity immediately before and/or after). Testamentary capacity is considered the lowest level of capacity a person must have in order to make a valid will.

The next type of capacity is called Donative Capacity, where the testator has the capacity to make gifts. This requires an understanding of the nature and purpose of the gift, including an understanding of the nature and extent of the property to be given, a knowledge of the natural objects of the donor’s bounty, and an understanding of the nature and effect of the gift. Some states require a higher standard for donative capacity than testamentary capacity.

A third type of capacity is Contractual Capacity, where the courts assess the person’s ability to understand the nature and effect of the act and the business being transacted. Contractual capacity is requires a higher level of capacity than testamentary capacity. If the transaction is highly complicated, a higher level of understanding may be needed versus something simple. Minors by definition have no legal capacity to contract and such contracts are generally voidable by the person who lacked capacity.

Other standards of capacity include the capacity to convey real property, the capacity to execute a Durable Power of Attorney and decisional capacity with the respect to a client’s health care.

The Attorney’s Role

What is the attorney looking for in determining if capacity exists? Possible cognitive signs of incapacity include:

  • Short-term memory loss
    • Quickly forgetting information just discussed
    • Repeating the same statements
    • Asking the same questions multiple times
    • Difficulty describing recent events
    • Inability to discuss sports or weather (“small talk”)
  • Communication Problems
    • I brought my “thing” with the papers in it (i.e., notebook)
    • Defers to others excessively (“My wife handles all my appointments; you’d have to ask her.)
    • Difficulty staying on topic
    • Difficulty finding words
  • Comprehension Problems
    • Difficulty repeating back or paraphrasing simple concepts
  • Calculation Problems
    • Difficulty with simple math
    • Adding dollar amounts
    • Inability to line up columns when adding
    • Lack of awareness of financial assets
  • Disorientation
    • Relative to time, space, or location
    • Difficulty navigating attorney’s office building spatially
    • Getting lost driving to the office
    • Knowing what time it is
    • Knowing what year it is
  • Significant Emotional Distress
    • Client appears extremely anxious, tearful, or depressed.
  • Emotional Inappropriateness
    • Extremely wide range of emotions (moving quickly from laughter to tears)
    • Expresses feelings that seem highly inconsistent with what he or she is discussing (e.g., laughter when discussing death)
  • Delusions
    • Belief that neighbor or government is spying on them
    • Belief that food is poisoned for assisted living facility or nursing home residents
  • Hallucinations
    • Hearing voices nobody else can hear
    • Having a conversation with another person who is not there
  • Poor Grooming/Hygiene
    • No brushing of hair
    • No shaving
    • No regular bathing/showering
    • Wearing multiple layers of clothing

There are some who suggest that it is inappropriate for an attorney to make a capacity assessment. Yet, the attorney makes capacity judgments daily, without formal training, including the initial determination of capacity as to whether the client can enter into the lawyer/client relationship. Throughout the representation, when signs present that capacity is questionable, the attorney must make deliberate efforts to assess capacity. Subsequent assessments of capacity beyond the initial assessment may be needed as capacity is fluid. The bottom line is that capacity assessments by lawyers are unavoidable.

The following questions will arise for the lawyer in assessing capacity: When does a lawyer rely on his or her own instincts? When should a lawyer refer the client to another professional for assessment?

Does the Lawyer Have Authority to
Refer a Client for Assessment?

First and foremost, the attorney must always presume capacity. For an assessment to take place, the concerned parties must overcome the presumption by exhibiting evidence of impaired decision-making.

According to the ABA Model Rules of Professional Conduct Rule 1.14, Comment 6, the “lawyer may seek guidance from an appropriate diagnostician” in determining the extent of the client’s diminished capacity.

The lawyer should obtain client consent for any assessments or screening tests performed or for referrals to other professionals for testing. Client consent is crucial. Even clients with diminished capacity may still consent to being screened. If a person is unable to consent, then consider whether there is a legally authorized surrogate who can make this decision, either someone named by the client as Durable Power of Attorney or a Health Care Surrogate.

The Restatement (Third) of the “Law Governing Lawyers,” Comment d. to Section 24, states where practicable and reasonably available, independent professional evaluation of the client’s capacity may be sought. A referral to a physician for a medical exam can help rule out if the client is being overmedicated or taking a toxic combination of medications that could affect capacity. A medical exam can also uncover issues such as a poor diet, vitamin deficiencies, depression, infectious diseases, head trauma, poor eyesight and other treatable conditions.

Diagnosticians may include psychiatrists, psychologists, gerontologists and other health professionals who can perform professional evaluations. A doctor’s letter detailing the capacity assessment can be very helpful, especially in potentially conflicted cases, in helping the attorney determine if a client has capacity.

If an agent under a power of attorney or other legal representative has been appointed for the client, the attorney may look to the representative for decisions on behalf of the client, according to the ABA Model Rules of Professional Conduct Rule 1.14, Comment 4. In addition, the attorney can consult with family members. According to Model Rule 1.14, Comment 3, “The lawyer may wish to have family members or other persons participate in discussions with the lawyer.”

Can the Lawyer Bring Protective Action?

The quick answer to this question is yes.

According to Model Rule 1.14(b): “When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken, and cannot adequately act in the client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator, or guardian.”

For an attorney to bring protective action for a client, the requirements include:

  • Existence of diminished capacity;
  • A risk of substantial harm;
  • An inability to act adequately in one’s own interest.

When taking protective action for a client, the lawyer is impliedly authorized to reveal information about the client, but only to the extent reasonably necessary to protect the client’s interests (see Model Rule 1.14(c)).

The Importance of Knowing a Person’s
Habitual Behavior and Values

Consider the following example:

“The doctors wondered, was she uncooperative, cantankerous, and obstinate because her memory and mental function were impaired, or was she a woman who had spent a long lifetime being uncooperative, cantankerous, and obstinate?”

The woman’s daughter was able to say that her mom had always been obstinate, but being uncooperative and cantankerous were new characteristics, more than likely associated with her injury. The main point of this is that a person does not lack capacity merely because he or she does things that other people find disagreeable or difficult to understand.

A great danger in capacity assessment is that a client’s eccentricities, aberrant character traits, or risk-taking will be confused with incapacity.

Lawyers should take the following mitigating factors into account when assessing a client’s capacity: stress, grief, depression, reversible medical conditions, hearing or vision loss and the client’s educational, socio-economic or cultural backgrounds.

When assessing a client’s capacity, the attorney should attempt to optimize capacity by taking a few reasonable steps. The attorney should always attempt to interview the client alone. However, sometimes, family, friends or caretakers can play an important role in providing essential background information relevant to the work to be done. Attorneys should adjust the interview environment to enhance communication. Impaired vision or hearing often produces non-responsive behaviors that may be wrongly interpreted as a lack of mental incapacity. Consider these steps to optimize the assessment interview:

  • Speak slowly and conduct the interview in a quiet, well-lit area.
  • Arrange the furniture in the room, so as to avoid glare from overhead lights or windows.
  • Provide necessary audio or visual amplification to facilitate communication and functioning.
  • Be patient. Some elder clients need extra time to process the information regarding decisions at hand.
  • Meet with the client more than once to acquire a truer sense of the person’s decision-making capacity.
  • Inaccurate sessions due to fatigue may be avoided by scheduling shorter sessions at times when the client tends to be most alert.
  • Home visits are especially conducive to optimal decision-making for many clients.

Once the above steps have been performed, consider a standardized screening or mini-mental status evaluation where the client should respond to the following requests:

  • Delayed recall of three items;
  • Repeating a linguistically difficult phrase;
  • Following a three-step command;
  • Writing a sentence;
  • Copying a two-dimensional figure;
  • Performing serial threes;
  • Spelling the word “world” backwards.

The danger in doing a mini-evaluation like this is that the results provide only a crude global assessment of cognitive functioning. A poor score does not rule out the client’s ability to perform some decision-making tasks. Further evaluations or additional and/or repeated evaluations may be necessary.

You can find out more information about assessing adults with diminished capacity in the following resources: ABA Comm. On L. & Aging & American Psychological Association, Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers (2005); National Academy of Elder Law Attorneys, Aspirational Standards for the Practice of Elder and Special Needs Law with Commentaries, (Second Edition, April 24, 2017).

If you have any questions about diminished capacity, you can visit our website at http://www.elderlawassociates.com or email me at hkrooks@elderlawassociates.com.

PRACTICAL TIPS FOR ETHICALLY DEALING WITH CLIENTS WITH DIMINISHED CAPACITY

Practical Tip 1:
Capacity is ever changing. It can ebb and flow, so you have to go with the flow. An attorney must be willing to meet the client where and when she or he is most lucid.
Practical Tip 2:
Remember that sometimes our client’s diminished capacity might be more of a reflection of our incompetency in adjusting to the emotional, physical and physiological needs of the client. We have an ethical obligation to presume and enhance a client’s capacity.
Practical Tip 3:
Be aware of distractions that may be around your office that would affect the client’s capacity, such as outside noise, a view of the plaza/sidewalk outside your office or with people walking by, glare, and difficulty for the client to hear or see you.
Practical Tip 4:
Representing clients with diminished capacity requires more time to explain matters fully. A series of shorter, more focused meetings may be necessary.
Practical Tip 5: 
Plan ahead for incapacity by asking permission and receiving consent to speak to others if the client’s capacity comes into question.
Practical Tip 6:
Listen intently to the client and follow up before jumping to conclusions. The attorney must assume capacity, so if the client says something that seems to indicate incapacity, follow up with questions to clarify what the client meant. Do not jump to the conclusion that what they are saying is inappropriate or evidence that the client has become incapacitated.
Practical Tip 7:
Watch for indications from one meeting to the next that the client is declining. The attorney should always be observant of declining hygiene or physical deterioration.
Practical Tip 8:
The attorney should attempt to meet in private with the client. If the client wishes to have other people present, the attorney must talk directly to the client and not be distracted by the other people. Although it is sometimes a challenge, the attorney must insist that it is the client who speaks and not someone else speaking for the client.
Practical Tip 9:
The attorney should sit facing the client so that the client may be able to obtain visual clues as well as the words themselves.
Practical Tip 10:
Respect and dignity: These are key in working with clients with diminished capacity.

Source: Roberta K. Flowers, Maintaining a “Normal Relationship” with Clients with Diminished Capacity, NAELA News, Spring 2015

Howard S. Krooks, Esq., CELA, CAP is a Partner at Elder Law Associates PA, with its headquarters located at 7284 W. Palmetto Park Road, Boca Raton, Florida 33433, and additional locations in Aventura, West Palm Beach and Weston, Florida. He is also Of Counsel at Amoruso & Amoruso LLP in Rye Brook, New York. For more information about Howard S. Krooks or Elder Law Associates PA, please visit www.elderlawassociates.com.

*ABA Model Rules of Professional Conduct Rule 1.14: Client with Diminished Capacity
Client-Lawyer Relationship
(a) When a client’s capacity to make adequately considered decisions in connection with a representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client.(b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian.

(c) Information relating to the representation of a client with diminished capacity is protected by Rule 1.6. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client’s interests.

The Delicate Issue Of Taking Away A Senior’s Smartphone

October 15, 2019

At first, Dr. Robert Zorowitz thought his  83-year-old mother was confused. She couldn’t remember passwords to accounts on her computer. She would call and say programs had stopped working.

But over time, Zorowitz realized his mother — a highly intelligent woman who was comfortable with technology ― was showing early signs of dementia.

Increasingly, families will encounter similar concerns as older adults become reliant on computers, cellphones and tablets: With cognitive impairment, these devices become difficult to use and, in some cases, problematic.

Computer skills may deteriorate even “before [older adults] misplace keys, forget names or display other more classic signs of early dementia,” Zorowitz wrote recently on a group email list for geriatricians. (He’s based in New York City and senior medical director for Optum Inc., a health services company.)

“Deciding whether to block their access to their bank accounts, stocks and other online resources may present the same ethical dilemmas as taking away their car keys.”

The emergence of this issue tracks the growing popularity of devices that let older adults communicate with friends and family via email, join interest groups on Facebook, visit virtually via Skype or FaceTime, and bank, shop, take courses or read publications online.

According to the Pew Research Center, 73% of adults 65 and older used the Internet in 2019, up from 43% in 2010. And 42% of older adults owned smartphones in 2017, the latest year for which data is available, up from 18% in 2013.

Already, some physicians are adapting to this new digital reality. At Johns Hopkins Medicine, Dr. Halima Amjad, an assistant professor of medicine, now asks older patients if they use a computer or smartphone and are having trouble such as forgetting passwords or getting locked out of accounts.

“If there’s a notable change in how someone is using technology,” she said, “we would proceed with a more in-depth cognitive evaluation.”

At Rush University’s Alzheimer’s Disease Center in Chicago, neurologist Dr. Neelum Aggarwal finds that older adults are bringing up problems with technology as a “non-threatening way to talk about trouble with thinking.”

“Instead of saying, ‘I have issues with my memory,’ people will say, ‘I just can’t figure out my smartphone’ or ‘I was trying to start that computer program and it took forever to get that done.’”

If the person previously used digital devices without difficulty, Aggarwal will try to identify the underlying problem. Does the older adult have problems with vision or coordination? Is she having trouble understanding language? Is memory becoming compromised? Is it hard for her to follow the steps needed to complete a transaction?

If using technology has become frustrating, Aggarwal recommends deleting apps on cellphones and programs on computers.

“The anxiety associated with ‘Oh, my God, I have to use this and I don’t know how’ totally sets people back and undoes any gains that technology might offer,” she said. “It’s similar to what I do with medications: I’ll help someone get rid of what’s not needed and keep only what’s really essential.”

Typically, she said, she recommends no more than five to 10 cellphone apps for patients in these circumstances.

When safety becomes an issue — say, for an older adult with dementia who’s being approached by scammers on email ― family members should first try counseling the person against giving out their Social Security or credit card information, said Cynthia Clyburn, a social worker in the neurology division at Penn Medicine in Philadelphia.

If that doesn’t work, try to spend time together at the computer so you can monitor what’s going on. “Make it a group activity,” Clyburn said. If possible, create shared passwords so you have shared access.

But beware of appropriating someone’s passwords and using them to check email or online bank or brokerage accounts. “Without consent, it’s a federal crime to use an individual’s password to access their accounts,” said Catherine Seal, an elder-law attorney at Kirtland & Seal in Colorado Springs, Colo. Ideally, consent should be granted in writing.

With his mother’s permission, one of Zorowitz’s brothers ― a physician in Baltimore — installed GoToMyPC, an application that allowed him to remotely manage her computer. He used it to reset passwords and manage items on her desktop and sometimes to order groceries online from Peapod.

Eventually, Selma Zorowitz lost interest in her computer as she slipped further into dementia and spent the end of her life in a nursing home. She died in 2014 at age 87.

Older adults with Alzheimer’s disease commonly turn away from digital devices as they forget how to use them, said Dr. Lon Schneider, a professor of psychiatry and neurology at the University of Southern California.

More difficult, often, are situations faced by people with frontotemporal dementia (FTD), which affects a person’s judgment, self-awareness and ability to assess risk.

Sally Balch Hurme’s 75-year-old husband, Arthur, has FTD, diagnosed in 2015. Every day, this elder-law attorney and author struggles to keep him safe in a digital world full of threats.

Hundreds of emails pour onto Arthur’s cellphone from telemarketers with hard-to-resist offers. His Facebook account is peopled with “friends” from foreign countries, all strangers. “He has no idea who they are. Some of them are wearing bandoliers of ammunition, holding their guns,” Hurme said. “It is horrific.”

Then, there’s Amazon, a never-ending source of shopping temptation. Recently, Arthur ordered four pocket translators, several watches and a large quantity of maple sugar candies for $1,000. Though returns are possible, Hurme doesn’t always know where Arthur has stored items he’s bought.

What steps has she taken to manage the situation? With Arthur’s permission, she unsubscribes him from accounts that send him emails and removes friends from his Facebook account. On his cellphone, she has installed a “parental control” app that blocks him from using it between midnight and 6 a.m. ― hours when he was most likely to engage in online activities. There’s also a “parental control” setting on the TV to prevent access to “adult” channels.

Instead of an open-ended credit card, Hurme gives Arthur a “stored value” card with a limited amount of money. She manages household finances, and he doesn’t have access to the couple’s online banking account. Credit bureaus have been told not to open any account in Arthur’s name.

If Hurme had her way, she said, she’d get rid of Arthur’s cellphone — his primary form of communication. (He has stopped using the computer.) But “I’m very sensitive to respecting his dignity and letting him be as independent and autonomous as possible,” she said. For all the dangers it presents, “his phone is his connection with the outside world, and I can’t take that away from him.”

The Graying of American Debt

October 15, 2019

Document Type

Working Paper

Date of this Version

5-2-2019

Abstract

Between 2003 and 2015, real aggregate debt in the hands of Americans aged 50 to 80 increased by 59 percent. Meanwhile, real debt held by Americans in their twenties and thirties was approximately flat. Using data from the Federal Reserve Bank of New York’s Consumer Credit Panel, we describe the extent of this debt increase and the distribution of debt growth by loan type. Real per capita home-secured debts held by older consumers show the steepest growth, though older borrowers have increased their obligations in all major debt categories. For long-held debts, these developments lead us to ask how such changes emerged: did older borrowers carry more debt through the Great Recession, after which access to consumer credit declined for new borrowers of all ages? Alternatively, have loan originations since the Great Recession favored older over younger borrowers? While our results indicate that the stock of long-held, home-secured debt sits largely with older borrowers, we also uncover evidence of a decisive tilt of new auto and mortgage originations away from younger borrowers and toward borrowers in their fifties, sixties, and even seventies. The motivation behind older consumers’ substantial new borrowing, often with long repayment terms, is the focus of ongoing research.

Keywords

Older adults, debt, home-secured debt, Great Recession

Working Paper Number

WP2019-9

Copyright/Permission Statement

The views and opinions offered in this paper do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. All findings, interpretations, and conclusions of this paper represent the views of the author(s) and not those of the Wharton School or the Pension Research Council. © 2019 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.

Acknowledgements

The authors wish to thank Andrew Haughwout, Henry Korytkowski, Equifax, and seminar participants at the Financial Planning Association for comments.

WP 2019 – 9 – M. Brown et al Online Appendix.pdf (504 kB)
Online Appendix

HUD Releases New Condo Rules for Reverse Mortgages

October 15, 2019

The U.S. Department of Housing and Urban Development (HUD) issued a new Mortgagee Letter (ML) late Thursday updating the origination requirement for FHA mortgages on condominium units, applicable to both the traditional, forward mortgage and reverse mortgage programs simultaneously. The letter provides additional clarification ahead of the rule’s implementation on October 15.

“FHA published ML 2019-17, Home Equity Conversion Mortgage (HECM) Program – Condominium Requirements, which outlines the updated origination requirements for HECMs in condominium projects in accordance with the recently published Single-Family (SF) Handbook guidance,” said HUD in a press release. “It also includes certain borrower eligibility requirements for seniors seeking to obtain a HECM for a condominium unit using FHA’s Single-Unit Approval process.”

Read the FHA INFO notice and the full Mortgagee Letter at HUD for further details on the changes.

Last month, HUD announced a forthcoming rule designed to make it easier for condo owners to get reverse mortgages and other FHA financing. The new rules related to condominiums going into effect next month will expand FHA financing for qualified first-time homebuyers as well as seniors looking to age in place, according to an August press memo released by HUD.

“For seniors, part of our mission is to provide affordable options to age in place. Condominiums can make a lot of sense for many seniors [for reasons of affordability],” said FHA Commissioner and Acting Deputy HUD Secretary Brian D. Montgomery on an August conference call with reporters. “Our single unit review now also includes reverse mortgages, known as Home Equity Conversion Mortgages (HECMs), designed to help seniors age in place.”

FHA estimated the new policy will notably increase the amount of condominium projects that will be able to gain FHA approval. 84% of FHA-insured condominium buyers have never owned a home before, according to agency data. Only 6.5% of the more than 150,000 condominium projects in the United States are approved to participate in FHA’s mortgage insurance programs.

How Will Medicare-for-all Proposals Affect Medicaid?

October 15, 2019

Summary

As the debate over the future direction of our health care system heats up leading into the 2020 Presidential election, several Democratic proposals to create a single, federal, universal health insurance program known as Medicare-for-all have garnered significant attention. These proposals would replace most current public and private health insurance with a new federal program that would guarantee health coverage for all or nearly all U.S. residents. However, many details about how a new public program would be implemented and financed are not yet known. While much attention has focused on the implications of ending private insurance and Medicare, the debate has largely ignored the effects on the low-income and vulnerable populations covered by Medicaid and the broader implications for states of eliminating the Medicaid program. Key changes related to Medicaid under current proposals include:

The Medicare-for-all debate has largely ignored the effects on the low-income and vulnerable populations covered by Medicaid and the broader implications for states of replacing the Medicaid program.

Medicare-for-all proposals would generally eliminate current variation in eligibility, enrollment and renewal processes, benefits, and payment and delivery systems that are part of the current structure of Medicaid where states have considerable flexibility to design programs within broad federal rules.

Proposals would extend coverage for certain Medicaid services important to vulnerable populations (such as comprehensive benefits for children and non-emergency medical transportation) to other populations. The proposals would continue Medicaid protections against high out-of-pocket costs.

One of the most fundamental changes under Medicare-for-all would be uniform coverage of community-based long-term care services for all Americans. Medicaid is the primary payer for these services today, with substantial state variation in eligibility and coverage. Under current Medicare-for-all proposals, these services would be required and explicitly prioritized over institutional services. Medicare-for-all proposals vary as to whether they would include institutional long-term care, such as nursing homes, or instead continue the current Medicaid coverage of these services, locking in state spending, variation in benefits across states, and limited access to populations beyond Medicaid.

Some proposals would have the federal government assume all or a significant share of the nearly $222 billion in state spending on Medicaid, leading to significant state savings, while other proposals call for a maintenance of effort for all or some current state Medicaid spending.

The proposals would shift responsibility for designing and implementing much of health policy from states to the federal government, in contrast to states’ role under Medicaid today.

Introduction

As the debate over the future direction of our health care system heats up leading into the 2020 Presidential election, several Democratic proposals to create a single, federal, universal health insurance program known as Medicare-for-all have garnered significant attention. These proposals would replace most current public and private health insurance with a new federal program that would guarantee health coverage for all or nearly all U.S. residents, though many details about how a new public program would be implemented and financed are not yet known. While much attention has focused on the implications of ending private insurance and Medicare, the debate has largely ignored the effects on the low-income and vulnerable populations covered by Medicaid and the broader implications for states of eliminating the Medicaid program.

Multiple Medicare-for-all proposals have been introduced in Congress and advanced by Presidential candidates. Currently, the proposals are characterized by two main approaches: proposals that create a single-payer system and eliminate other forms of coverage, including employer-sponsored insurance, Medicare and Medicaid; and proposals that eliminate the Medicare and Medicaid programs but maintain a role for private insurance. Medicare-for-all bills proposed by Rep. Pramila Jayapal (HR 1384) and Sen. Bernie Sanders (S. 1129) and endorsed by Presidential candidates Sen. Elizabeth Warren, Sen. Cory Booker, and Andrew Yang adopt the former approach. A Medicare-for-all proposal offered by Sen. Kamala Harris takes the latter approach. Each of these proposals differs in some way from the others. However, for purposes of this brief, we refer to these proposals collectively as Medicare-for-all, though we note where important differences in the proposals may have different implications for Medicaid.

Medicaid is administered by the states, and each state’s program is unique, reflecting states’ use of existing program flexibility and waiver authority to design their programs. Because of this variation, the specific implications of a shift from Medicaid to a Medicare-for-all program would vary across states. However, in all states, Medicaid plays a key role by providing affordable health coverage for vulnerable populations that includes a wide range of medical, behavioral health, and long-term care benefits. It also is the largest source of federal funds to states. This issue brief explores key ways in which a shift to Medicare-for-all could affect current Medicaid enrollees, future enrollees (such as those who may need long-term care coverage at a later time), and states, which jointly finance the Medicaid program along with the federal government. Table 1 summarizes key similarities and differences regarding eligibility, benefits, affordability, provider payment and delivery systems, and state financing in the main Medicare-for-all proposals and Medicaid.

Medicaid’s Role Today

Medicaid covers 75 million low-income adults, children, pregnant women, seniors, and people with disabilities. The Affordable Care Act (ACA) expanded Medicaid eligibility to serve as the basis of its larger set of coverage and affordability reforms. As of August 2019, 37 states including DC have adopted the ACA’s Medicaid expansion. In 2017, the Medicaid expansion group included more than 12 million newly eligible low-income adults. However, 2.5 people remain in a coverage gap, with income too high to qualify for Medicaid but too low to receive Marketplace subsidies in the 14 states that have not yet adopted the expansion. Medicaid also covers 45% of nonelderly adults with disabilities and millions more people with chronic conditions for whom private insurance, designed for a generally healthy population, is inadequate and/or unaffordable.

Medicaid covers a broad array of medical, behavioral health, and long-term care services. The Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit for children provides comprehensive coverage including preventive screenings, vision, dental, and hearing services, and any other medically necessary care. Federal standards outline minimum benefits for adults, such as hospital, physician, and nursing facility services. States also can cover a variety of optional benefits, such as prescription drugs and private duty nursing. Medicaid is the principal source of coverage for long-term services and supports (LTSS), including nursing home care as well as home and community-based services that enable seniors and people with disabilities to live independently. While all state Medicaid programs cover a comprehensive set of services, because states have flexibility to provide optional services for adults, there is significant variation across states.

Medicaid provides affordable coverage for its low-income enrollees. Federal standards prohibit states from charging premiums to those with incomes less than 150% of the federal poverty level (FPL), though some states impose premiums for certain adults through a Section 1115 waiver. Federal rules also limit cost-sharing to nominal amounts and entirely exempt certain groups and services from any cost sharing. Aggregate out-of-pocket costs for an individual may not exceed 5% of family income.

Medicaid provides access to a broad range of providers, including many with unique expertise in treating vulnerable and low-income populations. States set provider payment rates within broad federal guidelines, and as a result, there is significant variation across states in how provider rates are determined and in payment levels. Despite lower payment rates in Medicaid and gaps in access to some types of specialists, national data show that access to services for children and adults is comparable to private insurance and exceeds access for the uninsured. Medicaid programs contract with a broad range of providers, including many safety net clinics, hospitals, and other providers that have experience in meeting the needs of Medicaid’s vulnerable enrollees. Managed care has become the dominant Medicaid delivery system, though states have substantial flexibility in designing their delivery and payment systems.

Medicaid is financed jointly by the federal government and the states, guaranteeing federal matching payments to states with no pre-set limit. The matching structure of the program provides states with resources that automatically adjust for demographic and economic shifts, rising health care costs, and changing state priorities. This structure also enables the program to respond to public health emergencies and natural and other disasters. Examples of this response include providing a coverage safety net to people affected by the HIV/AIDS epidemic and expanding eligibility and benefits for children and pregnant women exposed to high levels of lead during the Flint water crisis. Recessions, rising costs of prescription drugs, and increasing needs for long-term care and behavioral health services are factors that put upward pressure on Medicaid spending growth. However, over time, Medicaid growth per enrollee has been lower than private health spending. Medicaid is a significant spending item in state budgets, but also the largest source of federal revenues due to the matching structure.

Implications of Medicare-for-all for Medicaid
Eligibility, Coverage, and Enrollment

Medicare-for-all programs would establish universal national health coverage for all or nearly all U.S. residents, eliminating the need for the specific eligibility pathways in the current Medicaid program. Medicare-for-all programs would establish uniform eligibility criteria across all states that are tied to U.S. residency and not based on income. Notably, Medicare-for-all would eliminate the current variability in eligibility for health coverage across states and fill in coverage gaps in states that have not adopted the ACA’s Medicaid expansion. Under Medicaid, states must cover certain populations, such as very low-income parents and children, pregnant women, and poor people with disabilities who receive federal Supplemental Security Income (SSI) benefits. States then choose from a variety of optional coverage pathways and waiver authorities to expand coverage, especially for children with significant disabilities and seniors and adults with disabilities who need long-term care. While all states currently adopt at least one of these optional expansions, Medicaid eligibility criteria differ across states. Medicare-for-all programs would eliminate the need for specialized eligibility determinations based on disability or functional status. How current Medicaid enrollees, particularly those with complex health care needs, would be transitioned to a new coverage plan, is an important policy and implementation issue in the new proposals.

Immigrants’ eligibility for coverage under Medicare-for-all is unclear, while their coverage under Medicaid today is subject to limitations. Medicare-for-all proposals grant authority to the Health and Human Services Secretary to define residency when determining eligibility for coverage, so it is not yet known how undocumented immigrants would be treated, though some proposals specifically cover legal immigrants and certain undocumented immigrants. Many Democratic candidates running for President say they support coverage for undocumented immigrants. Most legal immigrants are barred from Medicaid coverage for five years after entering the United States (except in the 35 states that have taken up the option to eliminate the five-year waiting period for Medicaid/CHIP coverage for lawfully-residing immigrant children and/or pregnant women). Undocumented immigrants are not eligible for Medicaid coverage, although state Medicaid programs reimburse providers for emergency care for individuals who are otherwise eligible for Medicaid except for their immigration status.

A process for auto-enrolling individuals into coverage under Medicare-for-all programs would replace existing application and renewal processes in Medicaid. Once established, all of the Medicare-for-all proposals call for automatically enrolling individuals in coverage at birth. Auto-enrollment would result in higher coverage rates compared to the current Medicaid program, since not everyone who is eligible for Medicaid presently is enrolled. Each state administers its own Medicaid eligibility determination system. The ACA included new policies and strategies to streamline the eligibility and enrollment process, such as greater reliance on electronic data sources instead of paper verification, in an effort to keep eligible people enrolled in coverage. Nevertheless, the need to apply for and periodically renew Medicaid coverage can sometimes result in eligible individuals churning in and out of coverage.

Benefits

Medicare-for-all programs would cover a comprehensive set of health care services for adults that would eliminate the current variability in Medicaid benefit packages across states. For example, the Medicare-for-all proposals include some benefits that are optional in Medicaid for adults and consequently not available in all states, such as dental and vision care. The Medicare-for-all benefit package also would include mental health and substance use treatment services. While all state Medicaid programs cover mental health and substance use disorder services, the scope of coverage for adults can vary. Many states rely on Medicaid to cover specialized behavioral health services, and the Medicare-for-all proposals would include some of these benefits. For example, the Sanders and Jayapal proposals include day treatment and psychosocial rehabilitation for those with chronic mental illness. Also, although prescription drug coverage is not required by the Medicaid statute, all states cover this benefit. Medicaid must cover all drugs with a rebate agreement as medically necessary, but states may apply utilization controls such as prior authorization, a preferred drug formulary, or quantity limits on drug refills or pills per prescription, and those differ across states. While Medicare-for-all proposals would establish uniform coverage for prescription drugs across states, it is unclear if coverage would be as comprehensive. Under both Medicare-for-all and Medicaid, all covered services must be determined medically necessary.

Medicare-for-all would cover certain services important to vulnerable populations that currently are covered by Medicaid but not other payers. In current Medicare-for-all proposals, these include the EPSDT benefit that provides a comprehensive set of services for children as well as non-emergency medical transportation to access medical appointments, with the Sanders and Jayapal proposals limiting this benefit to those with low incomes and/or disabilities.

One of the most fundamental changes under Medicare-for-all would be uniform coverage of community-based long-term care services; Medicaid is the primary payer for these services today, with substantial state variation in eligibility and coverage. Medicare-for-all would cover many of the community-based long-term care services covered by Medicaid today. And, unlike Medicaid, where most community-based long-term care services are optional, these services would be required, and explicitly prioritized over institutional services, under Medicare-for-all. With community-based long-term care services included in the Medicare-for-all benefit package, everyone would be eligible to receive covered services without regard to income or assets, unlike in Medicaid today. The Jayapal proposal includes functional eligibility criteria (e.g. limitation in an activity of daily living) to qualify for LTSS; today, states set Medicaid LTSS functional eligibility criteria. Unlike other Medicaid services, states are allowed to cap enrollment for many community-based long-term care services, which means that some people who meet the eligibility criteria do not receive them. Including these services in Medicare-for-all could mean that individuals currently on state Medicaid waiver waiting lists as well as others who are not financially eligible for Medicaid could have access to these services. However, it could take time to develop adequate system capacity in terms of infrastructure and workforce to accommodate such an expansion in paid LTSS. Additionally, the cost of providing a universal long-term care benefit package could result in some limitations or restrictions on these benefits as more details are known and Medicare-for-all is implemented.

Medicare-for-all proposals vary as to whether they would include institutional long-term care, such as nursing homes, or instead continue the current Medicaid coverage of these services. Under a scenario where Medicare-for-all includes institutional long-term care, all enrollees would receive these services as part of their basic benefit package as medically necessary, without regard to income or asset limits. The Jayapal proposal includes functional eligibility criteria for institutional long-term care, as it does for HCBS. The Jayapal benefit package includes a range of institutional services, which could also include institutions for mental disease (IMDs) and intermediate care facilities for those with intellectual or developmental disabilities (ICF/DD). Medicaid currently covers ICF/DD services but generally does not cover services in IMDs for individuals ages 21-64. If institutional services are carved out of Medicare-for-all and instead continue to be provided through state Medicaid programs, as under the Sanders bill, then individuals would need to continue to meet current eligibility criteria for these services, which vary across states. Under this approach, states would also be required to continue to pay their state share of costs for these services based on the current federal Medicaid matching rules. Those not eligible for Medicaid would continue to have to pay for institutional long-term care out of their own income and assets or through private long-term-care insurance, or spend-down to be eligible for Medicaid. The Sanders Medicare-for-all program would require states to maintain their existing Medicaid eligibility standards and spending on institutional long-term care services and would continue to provide states with federal matching payments for these services, locking in variation in eligibility standards across states.

Premiums and Cost Sharing

Medicare-for-all would continue the protections that Medicaid provides against high out-of-pocket costs. Medicare-for-all programs would eliminate or reduce premiums and cost sharing. The Sanders and Jayapal proposals would eliminate premiums and deductibles, and the Jayapal proposal would eliminate cost sharing, while the Sanders proposal would include minimal copayments on prescription drugs for those with incomes above 200% FPL. Under these proposals, today’s Medicaid enrollees would continue to be protected from high out-of-pocket costs. While most Medicaid enrollees do not pay premiums and have limited out of pocket expenses, any who do would likely see these costs eliminated.

Payment and Delivery Systems

Similar to Medicaid, all licensed and certified providers would be eligible to participate in Medicare-for-all programs; however, given the scope of Medicare-for-all programs, it is likely a broader array of providers will participate, expanding the choice of providers for current Medicaid enrollees. State Medicaid programs are required to contract with federally qualified health centers, and most contract with other essential community providers, and consequently, these providers are an important source of care for Medicaid enrollees. While these contracting requirements are not part of current Medicare-for-all proposals, it is expected that health centers and other essential community providers would participate to the same extent they participate in Medicaid programs today.

Medicare-for-all programs would create a national fee schedule for paying providers, eliminating variation in payment rates across states and payers in Medicaid today. While few details are available, Medicare-for-all programs would establish payment rates for hospitals, physicians, and other providers, subject to a global budget process and negotiation under some proposals. In general, states have flexibility in setting Medicaid provider payment rates, leading for variation in payment rates across states. In general, Medicaid rates paid to physicians and some other providers are lower than Medicare rates, while other providers, such as safety net hospitals, may receive higher payments through Medicaid compared to Medicare due to supplemental payments. It is unclear whether payment rates under Medicare-for-all proposals would be based on Medicare rates or set using a different methodology. In addition, federal rules require special Medicaid payment rates for some providers, such as federally qualified health centers and rural health clinics that have contributed to their participation in the program. These providers are likely to see an increase in revenue from improved coverage under Medicare-for-all programs; however, given longstanding relationships Medicaid enrollees have with safety net providers, how they fare under a new program will matter.

The reliance on fee-for-service payments under current Medicare-for-all proposals may move away from current payment and delivery models adopted by state Medicaid programs. Medicare-for-all programs would pay physicians and other providers on a fee-for-service basis, while institutional providers would be paid through a global budget arrangement under some proposals or through fee-for-service under others. Medicaid initially relied on fee-for-service payments, but in recent years, states have experimented with innovative payment designs in their Medicaid programs that seek to improve quality of care, control costs, and address social determinants of health. In addition, through their contracts with managed care organizations as well as managed fee-for-service models, states have emphasized care management for people with complex health needs. Some proposals would allow for these types of payment and delivery models, including private managed care plans, while others would not. While moving to global budgets and a national fee schedule will likely lower costs, some of the benefits of care management strategies, particularly for people with multiple or complex conditions and other vulnerable patients, may be lost.

State Responsibilities

The state role in health care financing would change substantially under a Medicare-for-all program compared to Medicaid. The state share of spending for Medicaid was $222 billion in 2017. Medicare-for-all proposals vary in how much states could save and how much funding states would be required to contribute relative to current spending. For example, under the Jayapal proposal, states could see significant savings relative to current Medicaid spending because Medicaid would be eliminated, and there would be no state financing requirements. However, under other proposals, states would remain responsible through a maintenance of effort (MOE) requirement for all or part of current state spending on Medicaid. The Sanders Medicare-for-all program would require states to maintain their existing Medicaid eligibility standards and spending on institutional long-term care services and would continue to provide states with federal matching payments for these services, locking in variation in eligibility standards and financing across states. Long-term care accounts for more than one in five dollars of Medicaid spending and in 2016, community based long-term care services accounted for 57% of all Medicaid spending on long-term care nationally, although this varies by state. The level of state savings under the Sanders proposal will vary based on current state spending on institutional long-term care services. Under the Harris proposal, states would be required to make MOE payments to the new program equal to the amounts they currently spend on Medicaid and CHIP, increased over time by inflation. Since Medicaid costs have typically increased at higher rates than inflation, states could see some savings over time, but significantly less relative to the Jayapal and Sanders proposals. It is not clear in the Harris and Sanders proposals how state spending from provider fees or taxes (a mechanism used by nearly every state to finance the state share of Medicaid) would be factored in the MOE calculation.

In addition to transferring fiscal responsibility, the proposals would shift the role of designing and implementing much of health policy from states to the federal government. Under current programs, states have significant flexibility to design and administer Medicaid and other related health programs. Medicare-for-all programs would create more uniformity in eligibility and benefits and could result in state savings, but the proposals would also limit states’ ability to leverage Medicaid funding to implement innovative payment and delivery system reforms. Without a comprehensive Medicaid program – and the substantial financing of health care that comes along with it – state policymakers would have a much more diminished role in the health care system generally. Some role for states may remain. For example, the Sanders proposal calls for a regional administrative structure that would include state directors. While the proposals may open other avenues for innovation, the state role in administering all aspects of Medicaid and running insurance departments would diminish under Medicare-for-all programs as these functions shift to federal responsibility.

Looking Ahead

Many details about how a new Medicare-for-all program replacing all or most current public and private health insurance would be implemented and financed are not yet known. As proposals continue to emerge and develop, it is important to focus on the implications related to Medicaid, the program that currently covers 75 million low-income and vulnerable Americans. As with other parts of the health care system, there will be trade-offs. Medicare-for-all proposals would generally eliminate current variation in eligibility, enrollment and renewal processes, benefits, and payment and delivery systems that are part of the current structure of Medicaid, where states now have considerable flexibility to design programs within broad federal rules. However, the transition to a new program, even one with equally comprehensive benefits and cost sharing protections, could be particularly disruptive for current Medicaid enrollees who tend to be sicker with more complex health conditions, and for whom the ability to maintain relationships with current providers will be important. A smooth transition to any new system also will be critical for current Medicaid enrollees who rely on personal care and other services to meet daily self-care needs and maintain independent community living.

More broadly, Medicare-for-all programs would extend coverage for some Medicaid services to more Americans, most notably community-based long-term services and supports. For states, the role in health care financing would change substantially under a Medicare-for-all program. Some proposals would have the federal government assume all or a significant share of the nearly $222 billion in state spending on Medicaid, leading to significant state savings. However, other proposals call for a state maintenance of effort around spending broadly or for specific services. The details about how the MOE would be implemented are not clear. In addition, the proposals would shift responsibility for much of health policy from states to the federal government. As the debate continues and additional details emerge, it will be important to continue to evaluate how Medicare-for-all proposals affect coverage, benefits, out of pocket costs and access to care for the low-income and vulnerable populations currently covered by Medicaid.