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LTC Bullet:

Defense of Medicaid Planning Ignores Consequences

Tuesday December 14, 1999


In his article, "The Future of Elder Law: A Second Perspective," (Nov. '99 Elder Law Report), Editor Harry Margolis takes on critics of Medicaid planning (the process of transferring or sheltering assets in order to receive Medicaid's long-term care benefits).

Margolis writes: "Some have declared that Medicaid and long-term care planning as we know it has a short and dismal future, what with Congress trying to criminalize advising people on how Medicaid works. Some critics believe it should disappear, that Medicaid is a welfare program and should be reserved for those who are poor to begin with or who become poor after first spending down all their assets....One of the oldest and easiest responses to such criticisms of Medicaid planning is that it's no different from tax planning. While one type of planning means that the public fisc spends more money, the other means that it takes in less money. The bottom line is the same."

Sounds reasonable, right? Were it only that simple. One of the darkest repercussions of Medicaid planning is that truly poor people are sometimes shut out of the better nursing homes nearby because of a limited supply of Medicaid certified beds. They may have to accept care far away or be placed onto waiting lists for months or even years.

How does this happen? Medicaid planners advise clients to hold back enough money ("key money") to enter a preferred nursing home as a private payer. Nursing homes always have space for private payers who are needed to offset low Medicaid reimbursement rates. After a few months, the Medicaid planner's client conveniently runs out of money and becomes Medicaid eligible. The result? A senior who artificially impoverishes himself to qualify for Medicaid takes a bed away from a truly poor person who cannot afford such legal maneuvering.

Medicaid planning has consequences far beyond just the public fisc spending more money. There is a tragic human side to this kind of legal planning that any parallel to tax planning simply ignores.

Medicaid planners assert that they're acting in the best interests of their client. Yet, how often could expropriating a person's assets and placing him or her on welfare be in anyone's best interest? Margolis writes, "the core of elder law has been and continues to be long-term care planning with one eye focusing on eligibility for Medicaid and the other on maintaining control of one's own future." If so, Medicaid planners must be cross-eyed since Medicaid planning results in clients losing control, not maintaining control, of their futures.

Margolis writes that, "if our leaders in Congress and in the administration are not going to tackle this [long-term care financing] problem, people will have to do as they have been doing for years now--use the program that is available and has become our de facto long-term care system: Medicaid."

Mr. President and Members of Congress: Are you listening? Last time we checked, Medicaid was a means-tested public assistance program...not some amorphous pot of money for the taking based on whoever has enough money to pay legal fees. Medicaid planners run circles around Medicaid's eligibility rules for their middle class and well-to-do clients and unwitting taxpayers pay for it. How long will you let this continue?

Sadly, Medicaid planning is a perfectly predictable out-growth of our current public policy that rewards people for ignoring the risk and cost of long-term care until it's too late. Lawmakers should take Mr. Margolis' warning as a challenge to enact rational
LTC reform that creates the necessary incentives for people to plan ahead for long-term care in order to secure top-quality care at the appropriate level and to avoid welfare. The Center for Long-Term Care Financing's "LTC Choice" proposal is a blueprint for such reform. Order a copy [$24.95; free to media and lawmakers] by contacting us at 206-447-1340 or

Source: Harry Margolis, "The Future of Elder Law: A Second Perspective," The EdlerLaw Report, Vol. XI, No. 4, November 1999, pps. 1-5.