LTC Bullet: Medicaid Estate Planning Unmasked
Thursday March 1, 2001
Medicaid estate planning (MEP) is the practice of artificially impoverishing an infirm senior in order to achieve Medicaid nursing home eligibility without spending down. Virtually no one defends Medicaid estate planning publicly. The only exceptions are a small minority of attorneys, financial planners and insurance agents who profit from selling advice or financial tools designed to short-circuit Medicaid eligibility rules. These hucksters are outspoken. Who hasn't noticed their newspaper columns, internet sites, or radio ads hawking special trusts, annuities, life care contracts or other legalistic gimmicks to qualify for welfare? Often, they claim to eliminate the need to save or insure for long-term care.
We frequently point out the downsides of MEP in LTC Bullets. It overburdens the welfare program; it leaves incapacitated seniors vulnerable to inferior care; it denies private payers to LTC providers; it deflates the demand for home and community-based services and assisted living; it reduces the market for financial tools to save, invest or insure for long-term care risk. Much research has shown that public officials, especially Medicaid policymakers and eligibility workers, criticize MEP severely for these and other reasons.
Thus, today we have a balance of opinion regarding the ethics and advisability of Medicaid estate planning. The commercial interests (especially MEP attorneys) who profit from the practice defend it unqualifiedly. On the other side, advocates for private financing and government officials responsible for administering public assistance cost-effectively, attack MEP as detrimental to both private and public financing of long-term care. What could tip this balance one way or the other? Why don't we ask seniors themselves what they think?
No one has ever inquired systematically about the opinions of elderly people and their caregivers concerning Medicaid estate planning. Until now. What follows are excerpts from an article titled "Medicaid Estate Planning: Perceptions of Morality and Necessity," by Leslie Curry, Cynthia Gruman and Julie Robison, published in the February 2001 edition (Vol. 41, No. 1) of "The Gerontologist," a peer-reviewed scholarly journal.
"In the research reported here, we sought to examine MEP from a perspective not yet explored--that of older individuals and their caregivers living in the community, who may be planning for how to finance nursing home care in the future. . . . Eighteen focus groups of 5-12 members each were conducted." (p. 35)
"Focus group participants were asked to share their views on MEP, guided by this series of broad questions: 'Some people talk about protecting their assets like their bank accounts or other properties so they don't get spent on the nursing home. This is called Medicaid estate planning. Have you heard people talk about this? What do you think about this? What are the advantages and disadvantages of doing this?'" (p. 37)
"Three emergent themes representing disincentives to engage in MEP were strongly expressed across all groups, regardless of race, SES [socioeconomic status] or experience with long-term care. First, participants agreed that the prospect of losing control of one's assets was very troublesome and unpalatable, even if such assets were turned over to children whom the parent trusted. Second, discussions about the stigma associated with receipt of Medicaid benefits were compelling and received substantial attention among some groups. Finally, the subjective norm data revealed a general consensus that MEP, although legal, is also immoral and inappropriate. This was a recurrent and forcefully articulated theme that occurred across groups that differed by race and SES." (p. 37)
"There was a strong consensus that individuals covered by Medicaid received a poorer quality of nursing home care, particularly if the caregiver was aware of the person's payment source." (p. 38)
"Two themes emerged from the focus group data that represent incentives to
participate in MEP. First, there was high concordance across all groups
as to the importance of avoiding total impoverishment associated with
prolonged nursing home stays. . . .
[CLTCF Comment: Medicaid exempts the home and all contiguous property regardless of value, a business including the capital and cash flow of any value, one automobile of any value, home furnishings of practically any value, $2,000 in cash, $1500 of life insurance cash value, burial costs, and many other kinds of property. For married couples, an additional allowance of up to $87,000 in assets and $2,175 per month of income (as of 2001, increasing with inflation annually) can be set aside for the community spouse. Clearly, Medicaid nursing home eligibility does not require anything approaching "impoverishment" and the article is correct in observing that the focus groups "either misunderstood or viewed as inadequate" Medicaid's extremely generous income and asset allowances. The truth is that the median elderly person in terms of income and assets qualifies for Medicaid nursing home care without employing elaborate Medicaid estate planning interventions.]
"There was commentary in most moderate- and high-SES groups that MEP was feasible or appropriate only for select individuals, particularly those with a substantial amount of assets. Several participants argued, however, that persons with very high assets should not be concerned with protecting such assets through MEP, because they can pay privately for services in settings other than a nursing home (such as a continuing care retirement community). . . . It was also observed that those participating in MEP had access to essential informational resources, such as elder law attorneys or financial resources. These comments emerged primarily from the moderate- and low-SES groups." (pps. 39-40)
"Although it is likely to be extremely challenging for researchers to recruit individuals who will report having transferred assets to qualify for Medicaid, working with elder law attorneys or certified financial planners to identify clients and using a methodology that effectively assures confidentiality may be useful." (p. 41)
[CLTCF comment: The only remaining group of people who have never been consulted about the merits and pitfalls of MEP are older Americans whose life savings have already been expropriated so they could be shunted into free (i.e., tax-payer financed) welfare homes. The authors of this article are correct in observing that research on this subject needs to be done and will be extremely difficult to do. Why? Think about it. You can't ask the elderly victims themselves, because most of them are already cognitively impaired by Alzheimer's, Parkinson's or stroke. Medicaid planners are protected by the attorney-client privilege from having to disclose the damage they've done. Adult heirs who've taken an early inheritance and placed their parents in a Medicaid nursing home aren't likely to talk with pride about the deed. Medicaid workers can't disclose who's done what because of confidentiality protections. Nursing home owners and administrators, who bear the brunt of the onerous financial and caregiving burden imposed by Medicaid planning, cannot talk openly either for fear of lawsuits. The only way to dig out and document the dirt on Medicaid planning is to conduct a national study of a valid random sample of Medicaid cases under the aegis of an appropriate government authority. It's never been done and probably never will be done because of the political sensitivity of the subject and the strong objections of the interest groups that profit from the status quo.]
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