Cascade Policy Institute

This proposal is one of ten winning reports from the 1996 Oregon Better Government Competition. The 1994 and 1996 Competitions were organized by the Portland-based Cascade Policy Institute. Opinions expressed are those of the author(s) and not necessarily those of Cascade staff or advisors, nor should they be construed as an attempt by Cascade Policy Institute to influence any election or legislation.

Increasing Home Care Options for the Elderly:
A Proposal to Expand Medicaid's Two-year Caregiver Rule

by Jerry Spegman
Portland, Oregon

Executive Summary

A generation ago Congress enacted Medicare to provide health insurance for the elderly and created Medicaid as its companion program to address the health care needs of the nation's poor. Today, a disproportionate amount of Medicaid funds are spent on the elderly, primarily for nursing home care. Oregon is a leader among the states attempting to reverse this trend by funding less expensive community-based long-term care alternatives.

Perhaps the best alterative to a nursing home placement is self-directing one's care at home to the greatest extent possible with the assistance of a limited number of caregivers. In 1988, Congress sought to encourage this approach by amending Medicaid's "transfer of assets" rule. Elder homeowners are now permitted to convey their homes without penalty to adult children who have been their caregivers for a minimum of two years should institutional care ultimately be required.

This paper will advocate for an expansion of the two year caregiver rule, eliminating its restriction to adult children. Expanding the pool of potential caregivers could significantly increase an elder homeowner's chance of deferring a nursing home placement or even avoiding one entirely. Elder homeowners should be encouraged to trade their home equity for the opportunity to enjoy their home ownership as long as possible.

About the Author

Mr. Jerry Spegman has worked for several years as a public interest lawyer dealing with elder law issues. He has represented the New Hampshire Division of Elderly and Adult Services, served on the Elder Abuse Task Force of the (Portsmouth, NH) Community Council os Senior Citizens, and has been a staff attorney for both Mid-Minnesota Legal Assistance and the Senior Citizens Law Project.

Medicaid pays for half of the nation's $75 billion dollar nursing home bill, and uses more than a third of all its funds for long-term care.⁽¹⁾ Persons age 65 or older, without question Medicaid's most politically powerful constituency, comprise 12% of its beneficiaries but absorb 28% of its outlays.⁽²⁾ Ever increasing life expectancies and rising nursing home costs are likely to continue this trend of disproportionate Medicaid spending on the elderly. This impending crisis is exacerbated by the growing field of "Medicaid planning" in which lawyers, accountants and financial advisors help some middle class elders manipulate the program's transfer of assets rules to artificially impoverish themselves, thus accelerating their eligibility for subsidized nursing home care.

Buried within those rules is a narrowly drawn and under utilized provision enacted by Congress that encourages adult children to care for their aging parents at home. This provision permits ownership of the parent's home to be transferred to the child without jeopardy to a subsequent Medicaid application for nursing home care when the application is preceded by at least two years of caregiving by the child in the parent's home. 42 USC 1396p(c)(2)(A)(iv). Oregon should seek permission from the federal Health Care Financing Administration (HCFA) to expand the scope and effectiveness of this provision by removing the restriction on the class of potential caregivers/beneficiaries to adult children.

This paper will first consider the disproportionate extent to which Medicaid is used for long-term care. The eligibility rules governing pre-application transfers of assets will then be examined, and the popularity of "Medicaid planning" will be discussed. Next, the two year caregiver rule will be explained, followed by the proposal to expand its reach and impact. Various measures designed to guard against abuse and exploitation of the care recipients under the expanded rule will then be outlined. Finally, likely sources of opposition to the proposal will be identified, and anticipated arguments against it will be addressed.

INTRODUCTION

"Since its enactment in 1965, Medicaid...has evolved from the companion legislation to Medicare that provided health financing to states for coverage of their welfare population, to a program that now finances health and long-term care services to one in eight Americans."⁽³⁾ (Throughout this paper, "long-term care" will refer to a range of non-acute medical and social services providing personal and supportive care to the elderly, primarily in nursing homes, but also in various community-based settings.)

While Medicaid accounts for 13% of all healthcare spending in America, it covers four times that percentage of country's nursing home costs.⁽⁴⁾ Two of every three nursing home residents are assisted by Medicaid which spends 21% of its total funding on nursing home care.⁽⁵⁾ Among the nation's fastest growing age group--people 85 and older--22% currently reside in nursing homes.⁽⁶⁾

Oregon is among a slight minority of states spending more than 40% of its total Medicaid budget on long-term care, most of it in institutional settings.⁽⁷⁾ Although recognized as the leading state in promoting community-based long-term care over institutionalized care, Oregon still spends more than twice on the former than it does on the latter (far better than the five-to-one national average).⁽⁸⁾ While about a tenth of Oregon's Medicaid recipients are elderly, they account for more than a quarter of the state's Medicaid spending.⁽⁹⁾ Nationally, the average per capita Medicaid outlay for an elderly beneficiary is more than eight times the amount spent on a child living in poverty.⁽¹⁰⁾ The opportunity to significantly redistribute Medicaid spending along generational lines is limited by two primary factors: (1) the imbalance in terms of political clout between the elderly and poor children; and (2) the inevitable inclusion in any serious effort to balance the federal budget of limiting future growth in Medicaid generally. From 1988 to 1993, total program spending at the state and federal level more than doubled from $51 billion to $125 billion and it is projected to grow by 2002 to $308 billion."⁽¹¹⁾

THE TRANSFER OF ASSETS RULE AND MEDICAID PLANNING

Eligibility for most public assistance programs is restricted to applicants with extremely limited income and asset levels. For example, Oregonians sixty-five and older seeking Medicaid for healthcare generally, and not for long-term care, must have monthly incomes below $496.70 and countable resources below $2,000. (OAR 461-155-270 and 461-160-015.) The income eligibility bar is set higher for nursing home residents, however, in recognition of the extraordinary cost of their care. The current monthly income cap in Oregon for Medicaid eligibility to pay for nursing home care is $1,410. (OAR 461-140-040.) While this is still a relatively modest level of income, it is one that many middle class elders will fall below after they have spent their assets down to the $2,000 eligibility level, particularly given the extent to which those depleted assets would have previously been relied upon as a source of monthly interest and dividend income.

Oregonians whose monthly income exceeds the $1,410 cap can still qualify for assistance to pay for nursing home care by establishing "income cap trusts" in accordance with a 1993 amendment to the federal Medicaid statute. (42 USC 1396p(d)(4)(B)). Such a trust sets aside the otherwise disqualifying amount of an applicant's income for certain limited lifetime uses, and upon the recipient's death the accumulated funds reimburse Medicaid. When Oregon first created its income cap in 1991, it joined just ten other states restricting Medicaid eligibility in this manner; elsewhere, eligibility is generally dependent on an applicant's income simply being less than the cost of nursing home care. Two years after Oregon joined the minority of states using an income cap, Congress significantly undercut this measure when it authorized income cap trusts, restoring the ability of many middle class elders to achieve Medicaid eligibility.

Reacting to the extension of public assistance eligibility to at least some in the middle class, Medicaid planners--comparable to estate or tax planners--have stepped forward to advise elders how to accelerate their eligibility for Medicaid by transferring assets to relatives. At a time when there is much public discourse about personal responsibility, aggressive and creative Medicaid planning may be at odds with the mood of the body politic. Its popularity is fueled by pitches like this: "Politicians and bureaucrats in Washington have created a maze of laws for the unwary elderly. Many of us will end up spending our nest egg in a nursing home. But some others will avoid the Medicaid trap. They'll get the government to pick up the tab while keeping their assets for their children."⁽¹²⁾

When a nursing home resident applies for Medicaid, she is asked to disclose any asset transfers she has made in the preceding thirty-six months for less than fair market value. If an uncompensated transfer has occurred, the value of the transfer is divided by the average monthly cost of nursing home care throughout Oregon to determine the length of the applicant's disqualification period, beginning with the month in which the transfer occurred. The average monthly cost (which the state first determined in early 1993 and has yet to recalculate) is $2,595. (OAR 461-140-295.)

To illustrate how the transfer of assets rule works, assume an applicant discloses that she gave $5,000 to her son the month before applying for Medicaid. She will be ineligible for 1.93 months--$5,000 divided by $2,595--beginning with the month of the transfer.

Assume further that this applicant was unaware of the transfer of assets penalty when she made the gift to her son. Even without the benefit of any Medicaid planning advice, however, she would still manage to escape the full impact of the disqualification: the first penalty month would be inconsequential because she did not seek Medicaid until the following month. It is this feature of the transfer of assets rule--the ability to immunize oneself from the penalty by carefully timing the transfer--which affords the most applicants the greatest opportunities for advantageous Medicaid planning.

If, for example, the applicant had $20,000 in savings when she entered the nursing home and immediately gave half that amount to her son, she would then simply pay her own way with the balance of her savings and by her fifth month she would qualify for Medicaid, even after disclosing the transfer on her application for assistance. By varying this applicant's circumstances even further, the true impact of Medicaid planning can be seen: if she had $200,000 in savings and, rather than facing an imminent nursing home placement she was merely concerned that she might require nursing home care sometime in the future, she could give $100,000 to her son and use her remaining $100,000 to withstand the imposition of any transfer penalty she may eventually incur.

A less conservative approach would be to put the entire $200,000 in her son's name and rely on him to pay her way should she require nursing home care before the expiration of the thirty-six month period for disclosure of asset transfers by Medicaid applicants. Using the average monthly cost of care as determined by the state - $2,595 - the most her son would have to spend of his $200,000 gift is $93,420 to cover a full thirty-six months. With each passing month that his mother remains healthy enough to avoid a nursing home placement, the amount of his gift which is at risk diminishes by $2,595.

Another Medicaid planning approach calls for the use of nursing home insurance to avert a transfer of assets penalty. Assume that the woman in the above examples had $500,000 in savings and investments. She could easily afford even the most expensive nursing home insurance which, for perhaps $15,000, would fully cover her costs for thirty-six months. After purchasing such a policy, she could give her son the balance of her assets and even if she then immediately became catastrophically ill, her eligibility for Medicaid upon the exhaustion of her insurance benefits would be unaffected by her generous gift to her son.

All of these examples involve a prospective nursing home resident who does not have a spouse, and in fact most residents tend to be unmarried (and over 80, female, and white).⁽¹³⁾ For married nursing home residents there are rules which, since 1988, have been designed to financially protect the spouse who remains in the community. These "spousal impoverishment" rules permit a shifting of income from the nursing home spouse to the community spouse to guarantee the latter a monthly income equal to at least an annually adjusted minimum level, currently set at $1,295. (OAR 461-160-620(5).) These rules also permit the community spouse to retain half of the couple's assets up to an annually adjusted maximum of $72,660. (OAR 461-160-580.) This protected share of resources for the community spouse is in addition to exempt resources such as the couple's home and its contents.

The above examples of how the transfer of assets rule operates differently in various circumstances illustrate why Medicaid planning has become so attractive to many elders, but at least some of the examples raise ethical questions about the manipulation of a welfare program's eligibility rules by those not among its intended beneficiaries. The disproportionate spending of Medicaid dollars on the elderly for nursing home care at the expense of younger, less politically powerful constituencies is obviously exacerbated by the aggressive and creative efforts of Medicaid planners.

At a recent seminar for Oregon elder law attorneys, participants were told that "Medicaid planning is analogous to tax planning. No one seriously questions the right to avail themselves of lawful tax deductions which result in the payment of less taxes. Similarly, there should be no ethical quandary in availing clients of lawful means to avoid impoverishment and qualify for Medicaid benefits."⁽¹⁴⁾ But for most applicants, the spousal impoverishment rules protect the spouse at home, and the applicant herself will have her shelter, nutrition, and healthcare needs essentially covered for the remainder of her life.

The impoverishment to which Medicaid planners are most frequently referring is the depletion of the Medicaid recipient's estate, a much less disturbing result than the poverty many Americans live with day to day. In the final example above, the woman making the $500,000 gift to her son would not have to fear impoverishment; at even double the average monthly cost of nursing home care in Oregon, an extraordinarily long nursing home stay would still leave her son with a sizable estate to inherit. Clearly, Medicaid planning is at least sometimes as much about transferring wealth as it is about avoiding poverty.

THE TWO YEAR CAREGIVER RULE

When elders concerned about a future nursing home placement seek Medicaid planning advice they are often primarily interested in protecting their homes. In many states, single individuals must agree to sell their homes and use the proceeds to pay privately for nursing home care before Medicaid will assist them. Oregon does not require liquidation of the home as a condition of receiving Medicaid for nursing home care (OAR 461-145-220), but it "has a national reputation for assertive estate recovery practices" and has been ranked by the federal government "in the top five states for the overall financial effectiveness of its Medicaid estate recovery program for the past several years",⁽¹⁵⁾ deferring until after the death of the nursing home resident the use of her equity in real property to offset the cost of her institutional care.

The section of the federal Medicaid statute which mandates that states penalize applicants for uncompensated transfers of their homes carves out an exception for transfers to adult children who live with their parents for at least two years during which they provide personal care services that enable their parents to remain in their homes rather than being placed in nursing care facilities. In Oregon, the rule also applies if the adult child's care forestalled an application for Medicaid coverage of any of the state's community-based alternatives to nursing home care. OAR 461-140-242(2)(c). This exception to the transfer of assets penalty essentially invites an adult child to take the place of Medicaid for two years, and in exchange Medicaid will be there to pay for the parent's institutional care, should it ultimately be needed, without any penalty for the conveyance of the parent's home to the child. There is no limit on how valuable a property can be in order to qualify for an exemption from the penalty under this provision. (Throughout this paper the caregiving which triggers application of this exception to the transfer of assets penalty will be referred to as "homecare", not to be confused with "in-home services", one of the several community-based long-term care alternatives to nursing home care funded by Oregon's Medicaid program.)

This exception could be a far more effective incentive to encourage homecare arrangements if it was not limited to adult children. It can reasonably be surmised that adult children of prospective nursing home residents are themselves frequently well into middle age, often homeowners themselves, and not necessarily residents of the same community as their parents. As currently written, the two year caregiver rule requires the adult child to move into the parent's home and is thus ideally suited only for adult children who do not own their own homes and who live near their parents. Moreover, there is no allowance under the current rule for the elder homeowner who is childless, a circumstance which seems likely to become increasingly more common, given current demographic trends.

By seeking permission pursuant to 42 CFR 430.25 from HCFA, the federal agency that administers Medicaid, to extend the current homecare rule to other family members, non-relatives and nonprofit organizations, Oregon could promote the care of the frail elderly in their own homes for a relatively significant length of time during which their reliance on Medicaid would be entirely eliminated. For example, grandchildren--young enough to be more geographically mobile than their parents and less likely to already own their own homes--might be attracted to the caregiver role if the rule is expanded. Another source of potential caregivers are people with prior experience in the field - caring, knowledgeable people for whom home ownership might be beyond reach, given the prevailing low wages in their chosen field.

Nonprofit organizations might also be attracted to the homecare field by the opportunity to acquire real estate in exchange for staffing an elder's household with caregivers on a round the clock basis. For example, organizations which provide community-based housing for the developmentally disabled might be well suited to enter the elder homecare field, and encouraged to do so by the chance to acquire future housing for their primary clients. An economic development agency might view expansion of the rule as an opportunity to acquire equity in real property which can be leveraged to employ the caregivers, with the property ultimately being added to the local community's affordable housing stock.

Oregon is already the leader among the states in spending Medicaid funds for community-based long-term care alternatives to institutional care, including adult foster homes, residential care facilities, in-home services, adult day care, and assisted living facilities.⁽¹⁶⁾ Since getting a waiver from HCFA in 1981 to aggressively use Medicaid funds for community-based care, Oregon has not only diverted elders from admission to nursing homes, but it has actually reduced by a third the number of people in them.⁽¹⁷⁾ Expanding the pool of prospective caregivers eligible for the benefit of the two year rule would compliment those efforts with the promise of Medicaid in the future (if needed) to secure unfunded homecare in the present.

PROTECTING THE HOMEOWNER FROM EXPLOITATION AND ABUSE

The current rule does not expressly address protecting the homeowner from abuse, neglect or exploitation by the caregiver. This may be so for at least two reasons: (a) the rule applies only to adult children, and thus the instance of parental abuse might be thought to be minimal; and (b) transfer of the home to the caregiver will only be exempt from Medicaid's transfer of assets penalty if the care provided during the minimum two year period successfully averted an earlier nursing home placement, implicitly requiring a level of care not likely to be satisfied by an abusive or neglectful caregiver.

Without accepting the validity of either of these premises, or speculating further about why the current rule is so silent regarding the potential for caregiver abuse, it is clear that any effort by Oregon to more aggressively encourage homecare by expanding the scope of the rule must proactively address this concern. Four interdependent measures to accomplish this, discussed below, are: 1) requiring an independent assessment of the homeowner's suitability for homecare; 2) requiring written contracts to convey the property, executed before the caregiving commences; 3) active case management throughout the period of caregiving; and 4) prohibiting the caregiver from acting as the homeowner's guardian, conservator, or agent pursuant to either a power of attorney or advanced directive for healthcare.

It can be argued that a more direct safeguard would be rigorous screening of prospective caregivers who would have to meet objective standards demonstrating their competency and integrity, and such an approach seems particularly reasonable when the homecare is to be provided by the hired staff of a nonprofit group. Any formal screening of individual caregivers, however, should avoid rigid standards that unduly intrude upon the homeowner's freedom to make this most personal of decisions. The current rule requires no such screening at all and places much faith in the benevolence of the child/parent relationship; the expanded rule should honor the autonomy of the homeowner by giving her wide latitude to select her own caregiver.

A. Independent Assessments of Homowners

The current rule, as would the proposed expansion of it, requires convincing evidence that, in the absence of the homecare that has been provided, the homeowner would have been appropriately placed in either an institutional or community-based long-term care setting throughout the (minimum) two year period.This can primarily be established under the current rule by a retrospective statement from the Medicaid applicant's physicianattesting to the homeowner's dependency on the caregiver. While qualified by profession to render an opinion in this regard, at least some physicians may find it difficult to be entirely objective, given the financial stakes, particularly when a long-term relationship with the patient's family exists.

Rather than deferring this assessment until after the caregiving has been rendered and the homeowner applies for Medicaid to enter a nursing home, the proposed expansion of the rule should require screening of the homeowner's needs and suitability for homecare on the front end. An effective mechanism to accomplish this already exists - the private admission assessment program administered by the Senior and Disabled Services Division (SDSD). The purpose of this program "is to ensure that non-Medicaid eligible individuals applying for or considering admission to a Medicaid-certified nursing facility receive information regarding appropriate service and placement alternatives." OAR 411-71-000. Pre-admission assessments are conducted by private agencies that contract with SDSD to perform the screenings. While mandatory for prospective nursing home residents, the program can be beneficial to individuals considering placement in an adult foster home or other community-based residential care setting, and is available to them for a fee on an optional basis. Under the proposed expansion of the homecare rule, an assessment at the homeowner's expense, conducted prior to the execution of the contract to convey the property, should be required before SDSD sanctions a caregiver agreement.

The assessment required for prospective nursing home residents has both mandatory and optional parts. The mandatory part determines the individual's physical and mental health status, activities of daily living needs, and treatment needs, while the optional part considers the individual's personal, family, and community support system, life style preferences and goals. (OAR 411-71-020(2).) The assessment required under the expanded homecare rule should address both of these areas of concern.

In addition to screening out homeowners who do not require the requisite degree of care and identifying for those who do community-based alternatives to nursing home care other than homecare, this assessment will assist the parties to a caregiving agreement as they negotiate their contract to convey the property by alerting them to various issues which might otherwise be overlooked.

B. Contracts to Convey the Property

The current rule does not require or even anticipate that the two year period of caregiving will result from a negotiated agreement between the two parties covering all contingencies. In fact, an applicant will often be unaware of the rule throughout the entire two years or more she receives homecare from her adult child. Even if the homeowner does not learn of the two year caregiver rule until she applies for Medicaid, she can still transfer her home to the child without penalty, in effect compensating her child after the fact for what had initially been a gratuitous undertaking.

If the pool of potential caregivers is expanded to include more distant relatives, non-relatives, and nonprofit groups, Oregon should only sanction property transfers made pursuant to contracts to convey, executed before the minimum two year caregiving period commences. While the state should refrain from dictating the terms of such contracts, it could promote the inclusion of provisions addressing certain matters.

For example, if an elderly homeowner contracts for homecare with a young married couple to whom she is not related, are they permitted to have house guests themselves on occasion? If so, for how long and under what circumstances? Can the caregivers have a pet? How will care be arranged, and paid for, when the caregivers need a respite. When the homeowner is transported to doctor appointments, church services or elsewhere, whose vehicle will be used? Who pays for the caregivers' groceries and utilities? Is either party's access restricted to any areas of the home? Can the caregivers make alterations to the premises to suit their tastes, or must these be deferred? How will the caregiving arrangement be impacted by the declining competency of the homeowner? And how will the caregivers be compensated if the homeowner dies before two years of care are provided?

Under the current rule, when the homecare is provided by the homeowner's child, the answers to these questions will often evolve over time. If the aging parent feels she has become a burden on her child, and the child becomes progressively more paternalistic, these questions can be answered unevenly, a result which is not, under the current rule, of particular concern to the state's Medicaid program. Eliminating the rule's restriction to adult children, however, would necessitate an up front airing of these questions between the parties. Not only should the contracts to convey be negotiated and executed on the front end if they are to be deemed at some future point to be within the purview of the expanded homecare rule, but copies of them should also be registered with SDSD before the caregiving commences.

C. Case Management

The laws proscribing abuse and neglect by elder caregivers in Oregon are clear, comprehensive and tough: ORS 124.050, 124.100, and 441.630-680. Enforcing them, however, is often complicated by the same kinds of dysfunctional familial dynamics which can thwart effective prosecution of child abuse and domestic violence. Notwithstanding the significant degree to which adult children are the perpetrators when elders are abused, neglected and especially exploited, if Oregon expands the current rule as proposed it obviously increases the risk that it may encourage at least some homecare arrangements which could ultimately victimize the elder homeowner. The state must therefore act affirmatively to counter that possibility and may actually have more opportunities to do so in the absence of what is often an almost impenetrable familial shield protecting the abuser.

Rather than assuming the reactive posture in which adult protective workers are normally cast, SDSD should assign a social worker to provide case management services to an elder homeowner when she registers her homecare contract with the agency so that her well-being can be actively monitored throughout the period during which she receives care. Alternatively, the homeowner may opt to pay for private case management, provided in accordance with acceptable standards such as those of the National Council on Aging or the National Association of Professional Geriatric Care Management.

SDSD should establish a sliding fee scale for its case management services based on the value of the home to be transferred in relation to the savings realized by the avoidance of a nursing home placement for at least the minimum two year period of homecare. If, for example, two years of long-term care in an institutional setting costs $65,000, then the more the homeowner's equity exceeds that amount the greater her fee for SDSD case management services should be. The parties to the homecare agreement should be free to negotiate responsibility for the SDSD fee, and a sliding scale as proposed above should result in the more generously compensated caregivers paying the fee more frequently.

The independent needs assessment and the contract to convey the property would provide the initial framework within which the case manager would coordinate and monitor necessary referrals and interventions. An individual care plan should be developed by the homeowner, the caregiver, and the case manager; members of the homeowner's family or other individuals whose participation she desires should be included on the team which drafts the plan. Implementation of the plan should be overseen by the case manager, and it should be reviewed on a quarterly basis or whenever status changes dictate. The case manager should, with her client's permission, seek input regarding the success or failure of the homecare arrangement from the homeowner's doctor, minister, friends, neighbors, relatives and any other community contacts identified in the pre-contract assessment.

D. Caregivers Barred from Serving as Fiduciaries

The decline in physical and/or cognitive functioning which might cause an elder homeowner to consider entering into a caregiving arrangement would also logically prompt consideration of various surrogate decision-making alternatives such as guardianship, conservatorship, durable power of attorney and advance directives for healthcare.

Under the current two year caregiver rule there is no prohibition against the adult child/caregiver serving in a fiduciary capacity for the parent, and it seems fairly likely that many such caregivers do, particularly as agents pursuant to powers of attorney. The opportunities for exploitation and neglect inherent in such an arrangement, both overt and subtle, are boundless. For example, assume that the homeowner's ability to continue living in her home would be significantly enhanced by certain physical adaptations to the home. Is there not a conflict of interest for the caregiver with control of the homeowner's finances, whose future home will be altered by these adaptations that have a relatively short-term utility? Other home improvements, paid for by the caregiver/fiduciary with the homeowner's funds, might clearly exceed what could reasonably be considered the homeowner's beneficial use and enjoyment.

Few elder homeowners who welcome, or simply accept, the presence in their homes of adult children as live-in caregivers will be adamant about insisting on control of their own finances, particular as the parent-child roles become progressively more reversed. Patterns of neglect and exploitation can develop insidiously, even somewhat innocently, in such an environment. While the state cannot presume to know better than the potential victim and infringe on the autonomy of her family in a prospective fashion, it must act preventively to deter fiduciary abuse if, as proposed, it affirmatively encourages homecare arrangements involving more distant relatives and non-relatives. The surest way to deter such abuse is to strictly prohibit caregivers seeking the benefit of the expanded two year rule from serving in fiduciary capacities.

Conflicts of interest are not limited to financial matters. When the legislature enacted the Advanced Directive for Health Care statute it wisely prohibited an "owner, operator, or employee of a healthcare facility in which the principal is a patient or resident" from serving as the principal agent for medical decision-making purposes. (ORS 127.520(2).) This provision exempts relatives by blood, marriage or adoption from the exclusion, as well as agents who would otherwise be excluded but were appointed prior to the principal's admission to the healthcare facility with which the agent has an affiliation.

If the homecare rule is expanded as proposed, all caregivers without exception should be barred from serving as agents pursuant to an advance directive. Simply put, a caregiver whose ultimate reward is realized upon the death of the care recipient needs to be distanced, for the protection of both parties, from the medical decision-making process. This bar would not necessarily require an amendment to ORS 127.520(2), but could simply be plainly stated in the expanded rule itself and made clear to both parties to a homecare arrangement when they initially seek to register their agreement with SDSD. Similarly, caregivers under the expanded rule should be ineligible for appointment as guardians or conservators by probate courts. Again, this ban can be enforced by SDSD and should not necessitate legislative action.

Once restricting the caregiver from serving as a fiduciary, the expanded rule should not then attempt to compel the homeowner to designate an agent pursuant to Durable Powers of Attorney or Advance Directives. That may well be a wise decision for the homeowner in most cases, and she should certainly be advised regarding it during the independent assessment preceding the negotiation of the contract to convey her property. Nonetheless, the state cannot insist on such delegation of authority by the homeowner.

Opposing Views

The current rule requires that the care provided by the adult child enables the homeowner to continue residing at home for at least two years during which she might otherwise have needed nursing home care or other long-term care which Medicaid covers. Currently, the rule probably applies as frequently to homecare which retrospectively qualifies as it does to homecare that was actually inspired by the rule. If the caregiver pool is expanded as proposed and the rule becomes more of an incentive to replace nursing home care with homecare for at least two years, it is likely the nursing home industry will argue that the state is promoting inadequate care of the frail elderly. That was the industry's position in response to the expansion of adult foster care in Oregon after the state got permission from the federal government to spend Medicaid funds on it and other community-based long-term care alternatives.⁽¹⁸⁾

Compared to nursing home care, adult foster care provides residents with a more homelike setting at about two-thirds the cost.⁽¹⁹⁾ Under the proposed expansion of the two year caregiver rule, homecare would obviously do better than providing a more homelike setting, and for at least the minimum two year period it would be at no public cost (other than that associated with SDSD case management). As many as five residents may live together in an adult foster care home, staffed by as few as one individual at a time, clearly not as advantageous a caregiver-to-care recipient ratio as a homeowner would enjoy under the expanded rule.

The nursing home industry would likely object to expansion of the homecare rule by arguing that, as with adult foster care, the caregivers would lack a sufficient level of professional training. Clearly there are trade-offs to be made by elders choosing among long-term care options, when they consider quality of care issues versus quality of life issues. Research comparing adult foster care and nursing home care in Oregon recently found that while nearly all of the nursing home residents in the study were appropriately placed in terms of their physical functioning needs, the needs of one-third of the foster care recipients would have been better met in nursing homes.⁽²⁰⁾ But there may be many reasons for this outcome, not the least of which is the "increased freedom to take risks ... inherent in the adult foster care setting",⁽²¹⁾ a characteristic of less institutionalized long-term care in general which can be fundamentally essential to the care recipient in terms of quality of life.

With more than one in five people 85 and older residing in nursing homes, institutionalized long-term care is reasonably mistaken for a near inevitability by many elders. The nursing home industry can generally assure elders and their families that its facilities are the safest, the best staffed, have the most organized social activities and the closest ties to hospitals and other healthcare providers. But while nursing homes will always occupy a critical place at the most restrictive end of the long-term care continuum, there are ever emerging alternatives and combinations of alternatives able to strike an appropriate balance between quality of care and quality of life issues. In addition to Oregon's success in promoting alternatives to institutionalized care, one particularly hopeful illustration of this is OnLok Senior Health Services in San Francisco. For more than a decade, OnLok has managed the preventive, primary, social, acute, rehabilitative, and long-term care needs of a frail, elderly clientele. "Although all of OnLok's enrolled clients are certified eligible for nursing home placement, only 6 percent of its patients are actually placed in a nursing home at any given time."⁽²²⁾

In addition to concerns about the competency of the caregivers in an expanded pool of prospective homecare providers, there are at least two other likely arguments against the proposal - the risk of increased elder abuse, and the intrusion of the state into what should strictly be a family matter. The first of these has been addressed in the preceding section proposing overlapping safeguards to minimize the incidence of abuse, neglect and exploitation. It is indisputable that elder abuse already occurs within the privacy of families as well as in institutional care settings where evidence of it may be bureaucratically obscured at times. The four safeguards proposed in Section IV above are at least as preventative as any measure currently addressing existing elder abuse.

The second of these contrary arguments--that homecare should be left to families and the state should not encourage non-relative caregiving--ignores the reality that the state is already paying for plenty of caregiving by non-relatives outside of the home, often for former homeowners after they gratuitously conveyed their real property to relatives who were unable, unwilling or unavailable to provide the care themselves. Moreover, the proposed expansion of the current rule is likely to bring forth many more nieces, nephews, grandchildren and other family members as caregivers than it will non-relatives or nonprofit organizations.

Whatever the composition of the new pool of caregivers, the state will not be forging unwilling unions between elder homeowners and non-relative caregivers. If the homeowner strongly desires to keep her property in the family but no relatives are interested in availing themselves of the benefit of the caregiver rule, she can choose not to use her equity to purchase homecare and instead opt for other long-term care services. With an expanded pool of caregivers, however, the elder homeowner will simply have more options if the urgency to keep her home in the family is felt more strongly by other family members than by herself.

Even those accepting the proposal conceptually might have concerns about specific issues such as the lack of a value limit on the property to be conveyed, or the possibility that homeowners will be abruptly placed in nursing homes immediately upon the expiration of the minimum two year caregiving period.

The first of these concerns should be addressed by market forces. As a practical matter, the owner of a million dollar estate on the coast is likely to have other options for meeting her personal care needs and is unlikely to be induced by a Medicaid provision to trade such a valuable property for personal services worth considerably less. Likewise, the owner of a mobile home worth $30,000 will not easily attract a caregiver. But while two parties may come to a mutually satisfactory homecare agreement involving a home worth $80,000, two other parties might agree on a different set of terms, with the home involved valued at $130,000. The disparity between these arrangements may not be as significant as it appears, depending upon the various terms of the respective contracts. Regardless, the state should not intrude upon the rights of private parties to bargain freely, provided that they comply with the safeguards against abuse proposed above.

Putting a price tag on two years of homecare is far more difficult than simply multiplying the average monthly cost of nursing home care in Oregon by twenty-four. It would be very much a subjective calculation, based both on the intrinsic value to the care recipient of remaining in her home as well as the quality of the caregiving which might vary greatly from one case to the next. If the rule is expanded as proposed, an appropriate range of values will evolve over time. The intent of the proposal is to use the assurance of public assistance in the future to encourage private care agreements in the present, and to the greatest extent possible the state should stay out of the way of the private parties to those agreements.

Ultimately, one of the most critical questions those parties will need to address is what they will do upon reaching the end of the minimum two year qualifying period. It should first be noted that the rule only applies to situations in which the homeowner's level of needs would warrant her admission to a nursing home from the very outset of the homecare arrangement, and that nursing home stays tend to be less than two years. A national study published in 1991 found that the median stay was about one year, while about a quarter of residents stay three years or more, and 13% stay at least five years.⁽²³⁾

Ideally, the relationship between caregiver and care recipient that forms over the first two years of their homecare arrangement would preclude its abrupt termination merely because an arbitrary milepost has been reached, and this will not be an uncommon result. The parties should be free to negotiate this point in their initial agreements. Perhaps the homeowner can agree to convey her property at the conclusion of two years of home care, and then have the option of paying a monthly rent to remain in place. Or the parties can agree in advance that a nursing home placement after the minimum two years of care have been provided must be deemed preferable at that point to continued homecare by a designated third party.

In any event, since the caregiver will not have fiduciary authority to actively pursue and effectuate a different placement, others such as the case manager, the homeowner's doctor, and her family will be in a position to advocate for maintaining the status quo, if it is advisable. The use of two years as the minimum qualifying duration of homecare in the current rule does not seem to have produced any reported evidence of sudden and harmful placement changes since the rule was enacted in 1988. As proposed, the expanded rule is designed to bring appropriate parties together who enter into their homecare arrangement only after a comprehensive examination of all that it is likely to entail, and following a thorough discussion and negotiation of a myriad of issues. This careful formation of the caregiving relationship increases the likelihood that the parties will appropriately deal with the termination of the relationship as well.

CONCLUSION

According to The Kaiser Commission of the Future of Medicaid, "[F]inding ways to stimulate the development of home- and community-based alternatives will continue to be a pressing challenge in Medicaid."⁽²⁴⁾ Oregon is one of six states currently leading the way, spending more than a quarter of its Medicaid long-term care dollars on community-based services.⁽²⁵⁾ The proposal outlined above will encourage an increase in long-term care being provided to many frail elderly in the only setting they want to be in--their own homes. There will be no Medicaid funds expended to induce elders to enter into caregiving contracts until and unless homecare ceases to be a viable long-term care option in a particular case.

It would be difficult to project the Medicaid savings realized by deferred or averted nursing home placements, and even more difficult to measure the quality of life benefits for the elder homeowners staying put as a result of expanding the current rule. What can be more easily pronounced is that less Medicaid funds should be spent on institutional long-term care, and that few among the elderly would not prefer to remain home if it were feasible. This proposal seeks a relatively modest change in the current law which aims to accommodate both of these imperatives.

ENDNOTES

1. Williams, Judith K., Medicaid Long Term Care: Current Status and Future Prospects, The Kaiser Commission on the Future of Medicaid, p. i (December 1994).

2. Kutza, Elizabeth A., Medicaid: the shifting place of the old in a needs-based health program, 19 Generations p. 54 (Fall 1995).

3. Rowland, D., Medicaid at 30, Journal of the American Medical Association, 7/19/95, p. 271.

4. Ibid.

5. Medicaid and Long-Term Care, The Kaiser Commission on the Future of Medicaid, p. 1,2 (February 1996).

6. Elder Law: Answers and New Directions, Oregon State Bar, p. 1-5 (July 1996).

7. Medicaid and Long-Term Care, op. cit., p. 7.

8. Williams, op. cit., note 1, p. 30.

9. Medicaid and the Elderly, The Kaiser Commission on the Future of Medicaid, Appendices A and B (September 1995).

10. Rowland, D., Medicaid: The Health and Long-Term Care Safety Net, The Kaiser Commission on the Future of Medicaid, p. 5 (6/29/95).

11. Ibid, p. 6.

12. Gateway Publishers, http://www.mo.net/gate

13. Medicaid and the Elderly, op. cit., note 9, p. 5.

14. The Changing Face of Elder Law, Oregon State Bar, p. 6-3 (June 1994).

15. Oregon State Bar, op. cit., note 6, p. 6C-1.

16. Williams, op. cit., note 1, p. 30.

17. Ibid.

18. Stark, Alice J., et al, Effect on Physical Functioning of Care in Adult Foster Homes and Nursing Homes, The Gerontologist, Vol. 3, No. 5, p. 649 (1995).

19. Ibid.

20. Ibid, p. 654.

21. Ibid, p. 655.

22. Testimony of George Gugoff, The Hospital Association of Pennsylvania, before the House Committee on Aging and Youth, 4/11/96, Harrisburg, PA.

23. Williams, note 1, p. 5.

24. Medicaid and the Elderly, op. cit., note 9, p. 8.

25. Ibid.