PACE and Divestment

“Divestment” is a term Medicaid uses to mean transferring assets before applying for benefits.  The term “lookback period” is a Medicaid term which refers to the period of time, prior to filing an application during which asset transfers are reviewed for divestment.  Generally, divestment done during the lookback period results in a penalty period of ineligibility.  The divestment rules have been one of the areas in Medicaid planning that has evolved over the years, with the lookback period being continuously extended, and divestment penalty calculations becoming more punitive.

PACE, the program for all inclusive care for the elderly, is a program that provides assistance to elders who meet the level of care screen for nursing home level of care.  PACE has the same income cap as MI Choice, and the same asset rules as both Medicaid long term care programs (MI Choice and nursing home).  PACE is unique in that funding comes through both Medicaid and Medicare.  PACE provides assistance through community centers, and requires that the elders be safe in their home at the time the assistance begins.  PACE programs already exist in much of the State, and under the 2014-2015 budget, will expand into even more areas in the near future.

Without fanfare, the State recently announced that divestment rules do not apply to the PACE program.  This is a potential game-changer.  We now have a system in which divestment rules apply to people seeking Medicaid in the nursing home and through the MI Choice Waiver program.  But divestment does not apply to PACE.  And, at least for the moment, divestment rules do not apply to persons seeking Aid and Attendance benefits through the Veterans Administration.

For planners, this distinction raises serious issues.  Artificial impoverishment as a means of qualifying for government benefits is a topic that never ceases to create challenges.  This development in PACE creates numerous questions and concerns, including the following:

  1. Is it good public policy to encourage people to give assets away in order to qualify for benefits?
  2. Is it good planning for vulnerable people to give up what they have in order to get benefits, recognizing that the situation could change in the future, and those benefits may change or the individual’s needs may change – leaving them without the resources they previously had to provide for options that might allow for higher quality of care choices?
  3. Is it good planning to give away assets to qualify for one benefit, with the prospect that down the road the individual may want to qualify for different benefits, and by doing so, cause them to lose eligibility for those benefits?
  4. The reality that in some families, there is an unhealthy desire in the children to obtain benefits for their parents, and keep the parents’ assets for themselves.
  5. In addition, many of the “professional” salespeople that target elders will use the greed of the younger generation to sell the idea that assets should be given away as a means of selling legal and financial products.

PACE rules require that once a person is in PACE, the PACE program is responsible for all of that person’s care costs, even as they decline. Meaning that once in PACE, if the person transfers to assisted living or the nursing home, PACE must pay for those costs as well, the potential now exists for the scenario that people who have care needs and meet the level of care for PACE, simply give their assets away, qualify for PACE, and as they decline, PACE assumes their care costs indefinitely.  PACE programs receive a fixed monthly contribution from Medicare and Medicaid for each enrollee.  The concept is that PACE programs are incentivized by this capitated funding to keep people healthy and in the least restrictive setting.  If people start seeking PACE with the idea that they are not necessarily looking at keeping elders independent, but rather, placing them in a program that will assume all costs as the level of care increases, and taking steps that would eliminate the potential for shifting into traditional Medicaid in the future, PACE programs could face serious financial challenges.