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LTC Bullet: Medicaid Planning Exposed

Friday July 17, 1998


In "The Tarnished Years" series which recently appeared in the Indianapolis Star/News, reporter
Joe Fahy documents in painful detail the experience of a frail senior, Raymond Parish, being
pressured by his attorney and family members to let Medicaid cover his wife's LTC expenses.

Despite Raymond's stress and confusion over his wife's recent placement in a nursing home, his
attorney is undeterred in moving the Medicaid planning process forward. The last of three meetings included family members invited specifically to encourage the Medicaid option.

While it is difficult to fault Raymond for making a rational economic choice--letting taxpayers pick up the tab for his wife's bills--his experience clearly demonstrates why public policy should encourage people to plan ahead for LTC with private insurance. Raymond's wife would have been assured top-quality care in a first-class facility, while Raymond would have been spared such a difficult and humiliating process.

Reporter Fahy is given unprecedented access into the typically private process of transferring or sheltering assets to qualify for Medicaid's LTC benefits. Medicaid planners routinely deny encouraging Medicaid dependency. They claim to provide only objective information to inquisitive clients. Joe Fahy's article puts this myth to rest.

As long as Medicaid remains an option after the insured event has occurred -- regardless of asset or income levels, there is no incentive to plan ahead for the risk of LTC expenses. Medicaid planners will continue to prosper until public policy corrects these perverse incentives.

The following are several telling excerpts from the story:

"[Raymond's] attention was fixed on his attorney, Jean Kitley. Patiently, she explained ways to maneuver his finances and get the government to pay his wife's nursing home bills.

"But the lengthy discussion of numbers and rules was more than the retired auto mechanic could grasp."

"Raymond was surprised to learn that provisions in the Medicaid law could keep him from losing anything. "Though he warmed to the idea, settling on a plan of action was not easy for him. It took three lengthy meetings with his attorney. Even then, he was unclear about details."

"[Attorney] Kitley outlined some possibilities.
o Raymond could simply pay his wife's $3,500 monthly nursing home bill until he reduced their assets by $34,000.
o He could make purchases for himself or [his wife] Evelyn, including improvements to their home and buying personal items.
o He could give money away, but doing so would require him to pay his wife's nursing home bill temporarily if the gifts equaled or exceeded $3,417 -- the average monthly cost of care in Marion County.

"Or Raymond could keep virtually everything, shielding assets instead of spending them. He could buy Series EE U.S. Savings Bonds, which Medicaid would not consider in determining Evelyn's eligibility. Six months later, when the bonds matured, he could cash them in and
recover his entire investment.

"'They don't question that?' said Raymond's daughter, Sandra Boring.

"'Nobody does,' Kitley replied."

"But Kitley declined to recommend a specific option.

"'It's how you philosophically feel about it,' she told Raymond. 'It's your call. I'm just explaining what the rules allow you to do.'

"Raymond churned his hands together as Kitley went over the options again.

"'I understand what you're trying to do,' he broke in. 'I can't handle it.'"

"Worried that her father would spend much of his savings on nursing home bills, [Raymond's daughter] Sandra asked her sister and brother-in-law to come to a third session with Kitley to help Raymond make a decision."

"Kitley told him she had another plan that might make him 'a little more comfortable.'

"He could apply for Medicaid for his wife, knowing he would be rejected because his assets exceeded the allowable limit. Then his attorney could appeal the decision, arguing that he needed all of that money to live on."

"Raymond's younger daughter, Sally Elston, mildly objected.

"'It seems like we're hiding money,' she said.

"But her husband, Bob, liked the idea, thinking ahead to their own old age. 'If anything happens to me,' he told her, 'I want you to get it all.'"

"A few weeks later, Raymond met with a caseworker at a Near-Eastside welfare office.

"'I've never been here before, and I hope I never have to come here again,' said Raymond, seated on a plastic chair in the cheerless waiting area, ahead of a group of young mothers and children.

"At the session with caseworker Michael Vaughn, Raymond and [daughter] Sandra answered questions on issues ranging from birth and marriage to property ownership and income. With shaky fingers, Raymond pulled from his wallet a sign of his long years of work: his first Social Security Card from 1937, so blackened from use that he had to get a replacement.

"Vaughn hardly seemed surprised that the Parishes had too much money to qualify. He said their lawyer 'apparently figured out the loophole or whatever to overcome that.'"

Fahy's article is a must read for anyone interested in the truth about Medicaid planning. You can find it and a link to a companion article "Law Allows Even Wealthy to Send Nursing Home Bill to Government" at You should retype this URL (instead of copying it) to ensure access to the article.