LTC Bullet: Medicaid Planners Confess
Thursday, October 2, 2003
LTC Comment: A survey intended to exonerate Medicaid planners is actually the strongest indictment of artificial impoverishment yet. More after the ***news.*** [omitted]
LTC Comment: The September 2, 2003 issue of "ElderLaw News" contained an article titled "Survey Finds Rich Are Not Engaging in Medicaid Planning." You can read the full piece, originally published August 4 on the ElderLaw Answers website, at http://www.elderlawanswers.com/news/XcNewsPlus.asp?cmd=view&articleid=347 . The article purports that the survey proves "the vast majority of those transferring assets to qualify for Medicaid coverage are individuals of very modest means who are transferring relatively small amounts of money." Let's take a close look at the findings and see if you agree.
Finding #1: "[M]ore than 60 percent of Medicaid planning clients transferred less than $75,000 and only 1 percent of clients who engaged in Medicaid planning had estates of $750,000 or more. . . . The amount transferred to qualify for Medicaid was less than $50,000 in 46 percent of the cases, and less than $75,000 in more than three-quarters of the cases. There were no reported instances of transfers greater than $500,000."
Analysis: Medicaid spent $47 billion in 2001 on nursing home care (Source: http://www.cms.gov/statistics/nhe/historical/t7.asp ) for approximately 1.7 million beneficiaries (Source: http://www.cms.gov/medicaid/msis/00total.pdf ). If only ten percent of these beneficiaries (a conservative estimate) transferred $50,000 each to qualify for Medicaid, that's $8.5 BILLION DOLLARS that people could have spent for their own nursing home care instead of qualifying prematurely for Medicaid. But that's not all, people on Medicaid qualify for dozens of other medical services, many of which Medicare does not cover. Thus, the total loss to Medicaid from people transferring assets to qualify is much higher than the cost of their nursing home care alone. Even this barely scratches the surface, however. Most Medicaid planning is done by people who never see an elder law attorney. The public is not stupid. The word is out on the "wheelchair telegraph" that you should buy exempt assets, purchase an annuity and get rid of as much of Grandma's property as possible before you submit a Medicaid application for her. Finally, don't forget that Medicaid nursing home recipients can retain a home and all contiguous property regardless of value, one business including the capital and cash flow of unlimited value, and many other exempt assets. All Medicaid planning is done over and above the already-generous resources that program recipients are allowed to retain. (Although exempt assets are vulnerable to estate recovery, few state Medicaid programs recover effectively from estates.) At a time when State Medicaid programs are in fiscal crisis and poor women and children are facing critical service and coverage cuts, does it make sense for the program's most expensive benefit to go to people who have intentionally sheltered and divested assets to qualify? Is it any wonder that the public remains "in denial" about the risk and cost of long-term care?
Finding: "The responding elder law attorneys reported that 28 percent of their Medicaid planning cases involved estates of $100,000 to $200,000 (excluding the home), while another 37 percent involved estates of less than $100,000."
Analysis: According to the US Census, the median net worth of elderly householders is $108,885. If you back out home equity, their median savings drop to $23,369. Clearly, therefore, the average Medicaid planning case handled by elder law attorneys involves people with personal wealth far above the national median. Only the upper fifth quintile of seniors in terms of income (those with monthly incomes in excess of $5,988 or $71,856 per year) have median net worths, excluding home equity, over $124,733. (Source: http://www.census.gov/prod/2003pubs/p70-88.pdf ) Thus, although Medicaid planners say they are only helping people on the economic margin, the fact is that--according to their own survey data--their average clients are among the most affluent seniors in America. No one would say all of these people are rich, but they are not poor and they could afford to pay for their own long-term care much longer if it were not for the lucrative business of putting them on Medicaid by means of artificial impoverishment.
Medicaid is supposed to provide a long-term care safety net for those in need. Medicaid planners transform Medicaid into inheritance insurance for baby-boomer heirs. They overload the program with people who would have, could have and should have paid privately or purchased private insurance. Medicaid is already struggling to ensure access to quality long-term care for the poor. Covering the upper-middle class and affluent clients of the Medicaid planning bar is simply not reasonable. It is possible to save Medicaid and improve access to long-term care for everyone: rich, poor and in between. But we must act soon. The Center for Long-Term Care Financing's analysis of the problem and proposed solution is "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle." You can read it at http://www.centerltc.com/pubs/CLTCFReport.pdf .