October 12, 1999
The Center for Long-Term Care Financing is beginning a new on-line series called "LTC Reality Check" to identify and correct objectively incorrect information on long-term care financing that routinely appears in news stories, books, speeches, and other venues.
From time to time, we will devote LTC Bullets to this "LTC Reality Check" effort. The goal is to provide accurate and timely information on how long-term care is financed and to demonstrate how easily information on this subject can be misunderstood, misinter-preted or misstated. In the vast majority of cases, incorrect information results from the complexity of the material and the fact that reality does not necessarily comport with what is desired, expected or intended.
The fact that a reporter, author or speaker "gets it wrong"
in one instance or another is by no means an indication of the
overall quality of his or her work. Moreover, we will not single-out
anyone for inclusion in an "LTC Reality Check" e-mail.
We will consider any recently published material that contains
incorrect information on core issues surrounding long-term care
financing. Accordingly, feel free to suggest material for consideration.
* * * * *
LTC Reality Check: Poverty is Not a Requisite for Medicaid Eligibility
In Thomas Cassidy's provocative and enlightening new book, "Elder Care: What To Look For: What To Look Out For!" (New Horizon Press, 1999), Cassidy includes the following information about Medicaid eligibility:
"[T]o qualify for Medicaid, the insurer of the poor, a person's entire life savings (including Social Security, pensions, IRAs, 401(K)s, and every other valuable asset) must first be drawn on to pay for long-term care .Medicaid has stringent eligibility requirements, including an income and assets 'ceiling.' Simply put, poverty is a requisite for participation in the Medicaid program. This forces many older patients and their families to pay privately for elder care, usually with great financial difficulty and stress. Most older Americans who need long-term care cannot qualify for Medicaid until they have exhausted their life savings." (pps. 153, 166)
The reality is that most seniors qualify easily for Medicaid nursing home benefits, regardless of income or assets, without "drawing on" or "spending down" much, if anything. The often-quoted limit on assets of $2,000 is meaningless because Medicaid recipients can also retain a home, business, car, personal property, and many other assets of practically unlimited value.
Income is not an obstacle either. In "medically needy" states, Medicaid programs place no limit on the amount of income recipients can receive as long as their medical expenses (including nursing home care) are high enough. In "income cap" states, with a $1,500 per month income eligibility limit, people can siphon off any excess income into "Miller Trusts" to qualify for Medicaid immediately.
Even those few who do "spend down" to qualify for Medicaid (only 10-25% of Medicaid nursing home recipients begin as private payers) may have impoverished themselves artificially, with the help of professional Medicaid planners, instead of paying for long-term care out of pocket. Assets worth hundreds of thousands of dollars are easily (1) converted to exempt status (such as a home, business or automobile), (2) sheltered in annuities or special trusts, and (3) divested by means of creative strategies that evade anti-asset-transfer laws and regulations.
Poverty program? The most that can be said is that Medicaid was intended to be a poverty program and some of the basic eligibility rules continue to lend themselves to this misconception. The reality is far different.
Want to know more? Check out the Center for LTC Financing's
latest white paper "The Myth of Unaffordability: How Most
Americans Should, Could, and Would Buy Private Long-Term Care
Insurance (especially sections titled "How do long-term care
insurance companies market the product and why haven't their methods
been more effective?"; "How widespread is Medicaid planning
and does it really influence whether or not people purchase private
long-term care insurance?"; and "If Medicaid nursing
home benefits are so easy to obtain, why do so many people say
Medicaid requires impoverishment?" (pps. 31-42)). You can
order a copy [$34.95; free to media and legislators] by clicking here
and sending us your name, organization name, mailing address and
phone number. We will send the publication and invoice via 1st
class US mail.